As filed with the Securities and Exchange Commission on May 26, 2023.

 

Registration Number 333-

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933

 

 

Innovative Eyewear, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Florida		5995		84-2794274
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification No.)

 

11900 Biscayne Blvd., Suite 630

North Miami, Florida, 33181

(954) 826-0329
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)

 

 

Harrison Gross

Chief Executive Officer

11900 Biscayne Blvd., Suite 630

North Miami, Florida, 33181

(954) 826-0329
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)

 

 

with Copies to:

 

Barry I. Grossman, Esq.
Sarah W. Williams, Esq.
Ellenoff Grossman & Schole LLP
1345 Avenue of the Americas
New York, NY 10105
Phone: (212) 370-1300
Fax: (212) 370-7889

 

 

Approximate date of commencement of proposed sale to public:

As soon as practicable after the effective date hereof.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act, check the following box. ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer	☐	Accelerated filer	☐	Non-accelerated filer	☒	Smaller reporting company	☒
						Emerging growth company	☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

 

 

 

The information contained in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

SUBJECT TO COMPLETION

DATED MAY 26, 2023

 

 

Innovative Eyewear, Inc.

 

300,000 Shares of Common Stock

 

This prospectus relates to the resale of up to 300,000 shares of common stock, par value $0.00001 per share, of Innovative Eyewear, Inc. (“we,” “us,” “our,” or the “Company”), consisting of up to 300,000 shares of common stock issuable upon exercise of the warrants (the “April Warrants”) to purchase shares of common stock at an exercise price of $3.75 per share originally issued by us on April 19, 2023 in a private placement of warrants that occurred on April 17, 2023 (the “April Offering”).

 

This registration does not mean that the selling stockholders named herein will actually offer or sell any of these shares. We will not receive any proceeds from the resale of any of the shares of common stock being registered hereby sold by the selling stockholders. However, we may receive proceeds from the exercise of the April Warrants held by the selling stockholders exercised other than pursuant to any applicable cashless exercise provisions of such warrants.

 

Our common stock is listed on the Nasdaq Capital Market, or Nasdaq, under the symbol “LUCY”. On May 17, 2023 the last reported sale price of our common stock was $2.19 per share.

 

Following effectiveness of the registration statement of which this prospectus forms a part, the sale and distribution of securities offered hereby may be effected from time to time in one or more transaction that may take place on Nasdaq (or such other market or quotation system on which our common stock is then listed or quoted), including ordinary brokers’ transactions, privately negotiated transactions or through sales to one or more dealers for resale of such securities as principals, at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. Usual and customary or specifically negotiated brokerage fees or commissions may be paid by selling stockholders. The selling stockholders and intermediaries through whom such securities are sold may be deemed “underwriters” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the securities offered hereby, and any profits realized or commissions received may be deemed underwriting compensation.

 

This prospectus describes the general manner in which shares of common stock may be offered and sold by any selling stockholders. When the selling stockholders sell shares of common stock under this prospectus, we may, if necessary and required by law, provide a prospectus supplement that will contain specific information about the terms of that offering. Any prospectus supplement may also add to, update, modify or replace information contained in this prospectus. We urge you to read carefully this prospectus, any accompanying prospectus supplement and any documents we incorporate by reference into this prospectus and any accompanying prospectus supplement before you make your investment decision.

 

We are an “emerging growth company” as that term is defined in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to take advantage of certain reduced public company reporting requirements for this prospectus and future filings.

 

Investing in our securities involves a high degree of risk. See “Risk Factors” beginning on page 11. 

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

 

Table of Contents

 

		Page
Prospectus Summary		1
Cautionary Note Regarding Forward-Looking Statements		10
Risk Factors		11
Use of Proceeds		33
Determination of Offering Price		34
Market Information for Common Stock and Dividend Policy		35
Management’s Discussion and Analysis of Financial Condition and Results of Operation		36
Business		51
Management		69
Executive Compensation		73
Certain Relationships and Related Transactions		79
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		81
Description of Securities Being Registered		82
Selling Stockholders		84
Plan of Distribution		85
Experts		87
Legal Matters		87
Where You Can Find More Information		87
Index to Financial Statements		F-1

 

 

Please read this prospectus carefully. It describes our business, our financial condition and our results of operations. We have prepared this prospectus so that you will have the information necessary to make an informed investment decision. You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with any information or to make any representations about us, the securities being offered pursuant to this prospectus or any other matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us.

 

The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Neither the delivery of this prospectus nor any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date of this prospectus. This prospectus will be updated and made available for delivery to the extent required by the federal securities laws.

 

We further note that the representations, warranties and covenants made by us in any document that is filed as an exhibit to the registration statement of which this prospectus is a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreements, and should not be deemed to be a representation, warranty or covenant to you. Moreover, such representations, warranties or covenants were accurate only as of the date when made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.

 

This prospectus includes estimates, statistics and other industry data that we obtained from industry publications, research, surveys and studies conducted by third parties and publicly available information. Such data involves a number of assumptions and limitations and contains projections and estimates of the future performance of the industries in which we operate that are subject to a high degree of uncertainty. This prospectus also includes data based on our own internal estimates. We caution you not to give undue weight to such projections, assumptions and estimates.

 

This prospectus contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the^® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent possible under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by any other companies.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Risk Factors

 

Any investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, which we believe represent certain of the material risks to our business, together with the information contained elsewhere in this prospectus, before you make a decision to invest in our securities. Please note that the risks highlighted here are not the only ones that we may face. For example, additional risks presently unknown to us or that we currently consider immaterial or unlikely to occur could also impair our operations. If any of the following events occur or any additional risks presently unknown to us actually occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline and you could lose all or part of your investment.

 

Risks Relating to Our Business, Strategy and Industry

 

The optical industry is highly competitive, and if we do not compete successfully, our business may be adversely impacted.

 

We compete directly with large, integrated optical players that sell both at the retail level and online such as Ray-Ban^® that have multiple products, well regarded brands and retail banners, as well as established and well-regarded consumer electronics companies such as Bose^®. This diversified and capable competition takes place both in physical retail locations as well as online, for smart glasses. To compete effectively, we must continue to create, invest in, or acquire, advanced technology, incorporate this technology into our products, obtain regulatory approvals in a timely manner where required, and process and successfully market our products.

 

Most if not all of our competitors have significantly greater financial and operational resources, longer operating histories, greater brand recognition, and broader geographic presence than we do. As a result, they may be able to outmaneuver us in the marketplace and offer capable products at more competitive prices, which may adversely affect our business. They also are able to spend far more than we do for advertising. We may be at a substantial disadvantage to larger competitors with greater economies of scale. If our costs are greater compared to those of our competitors, the pricing of our products may not be as attractive, thus depressing sales or the profitability of our products and services. Our competitors may expand into markets in which we currently operate, and we remain vulnerable to the marketing power and high level of customer recognition of these larger competitors and to the risk that these competitors or others could attract our customer base. Some of our competitors are vertically integrated and are also engaged in the manufacture and distribution of glasses and many of our competitors operate under a variety of brands and price points. These competitors can advantageously leverage this structure to better compete and access the market with significant market power could make it more difficult for us to compete. We purchase some of our product components from suppliers who may be affiliates of one or more competitors or may compete with ourselves in the future.

 

We may not continue to be able to successfully compete against existing or future competitors. Our inability to respond effectively to competitive pressures, improved performance by our competitors, and changes in the retail and e-commerce markets could result in lost market share and have a material adverse effect on our business, financial condition, and results of operations.

 

We have a history of losses, and we may be unable to achieve or sustain profitability.

 

We had a net loss of $1,430,810 for the three months ended March 31, 2023, a net loss of $5,681,833 for the year ended December 31, 2022, and a net loss of $3,244,506 for the year ended December 31, 2021. As of March 31, 2023, we had an accumulated deficit of $11,736,797. Because we have a short operating history it is difficult for us to predict our future operating results. We will need to generate and sustain increased revenue and manage our costs to achieve profitability. Even if we do, we may not be able become or increase our profitability.

 

Our ability to generate profit depends on our ability to strengthen and expand our brand, continue to provide exciting products customers love, expand sales and improve margins. We are aiming to achieve profitability in the next two years, and between now and then we plan to efficiently invest in the business to bring it to scale by:

 

 

●

enhancing our products with new designs, functionality, and technology to widen our appeal and delight customers in a wide variety of demographic groups; and,

 

●

investing in our product development, supply chain and sales and marketing capabilities to leverage external resources as efficiently as possible to ensure that smart glasses are affordable for the majority of the world’s population who need them.

 

However, we may not succeed in any of the foregoing, and the planned investments may not result in profitability.

 

We have limited experience in the smart eyewear space. If we are unable to manage our growth effectively, our brand “Lucyd”, and our financial performance may suffer, which may have a material adverse effect on our business, financial condition, and operating results.

 

The smart eyewear industry is newly emerging. Whilst our directors have more than 80 years of combined experience in the eyewear industry, the smart eyewear market presents numerous new challenges. To effectively manage these challenges and continue to grow, we must continue to invest in the design of new frames and technology, expand our product line and effectively integrate several new technologies into eyewear. Achieving this could strain our existing resources, and we could experience ongoing operating difficulties in managing our business and bringing it to scale. Failure to scale could harm our competitive position and future success, including our ability to retain and recruit personnel and to effectively execute our corporate objectives.

 

Our ability to generate net revenue will depend upon many factors, some of which we may have no control over.

 

The industry for stylish, affordable smart glasses, is rapidly evolving and may not develop as we expect. Even if our net revenue continues to increase, our net revenue growth rates may decline in the future as a result of a variety of factors, including macroeconomic factors, increased competition, and the maturation of our business. As a result, you should not rely on our net revenue growth rate for any prior period as an indication of our future performance. Overall growth of our net revenue will depend on a number of factors, including our ability to:

 

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Increase exogenous distribution of our products in optical stores, big box retailers, specialty retailers and through multiple e-commerce channels;

 

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Price our products so that we are able to attract new customers, and expand our relationships with existing customers;

 

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Accurately forecast our net revenue and plan our operating expenses accordingly;

 

●

Successfully compete with other companies that are currently in, or may in the future enter, the smart eyewear industry or the markets in which we compete, and respond to developments from these competitors such as pricing changes and the introduction of new products and features, noting that most, if not all, of our competitors have stronger balance sheets and larger staffs to devote to their products;

 

●

Comply with existing and new laws and regulations applicable to our business;

 

●

Develop new product offerings, with services and features, including in response to new trends, competitive dynamics, or the needs of customers;

 

●

Successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our business;

 

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Avoid interruptions or disruptions in our supply chain from natural disasters and political uncertainty;

 

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Provide customers with a high-quality experience and customer service and support that meets their needs;

 

 

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Hire, integrate, and retain talented sales, customer experience, product design, and development and other personnel;

 

●

Effectively manage growth of our business, personnel, and operations;

 

●

Effectively manage our costs related to our business and operations; and,

 

●

Enhance our reputation and the value of the Lucyd brand.

 

Because we have a limited history operating our business, it is difficult to evaluate our current business and future prospects, including our ability to plan for and model future growth. Our limited operating experience combined with the rapidly evolving nature of the market in which we sell our products and services, substantial uncertainty concerning how these markets may develop, and other economic factors beyond our control, reduces our ability to accurately forecast quarterly or annual revenue. Failure to manage our future growth effectively could have an adverse effect on our business, financial condition, and operating results.

 

We also expect to continue to expend substantial financial and other resources to grow our business, and we may fail to allocate our resources in a manner that results in increased net revenue growth in our business. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, and other unknown factors that may result in losses in future periods. If our net revenue growth does not meet our expectations in future periods, our business, financial condition, and results of operations may be harmed, and we may not achieve or sustain profitability in the future.

 

Increases in component costs, shipping costs, long lead times, supply shortages, and supply changes could disrupt our supply chain and factors such as wage rate increases and inflation can have a material adverse effect on our business, financial condition, and operating results.

 

Meeting customer demand partially depends on our ability to obtain timely and adequate delivery of components for our products and services. All of the components that go into the manufacturing of our products and services are sourced from a limited number of third-party suppliers predominantly in the U.S., and China. Our contract manufacturers purchase and provide many of these components on our behalf, including sun lenses, demo lenses, hinge and chip sets and other electronic components, and we do not have long-term arrangements with most of our component suppliers. We are therefore subject to the risk of shortages and long lead times in the supply of these components and the risk that our suppliers discontinue or modify components used in our products. In addition, the lead times associated with certain components are lengthy and may preclude rapid changes in design, quantities, and delivery schedules. Our ability to meet temporary unforeseen increases in demand has been, and may in the future be, impacted by our reliance on the availability of components from these suppliers. We may in the future experience component shortages, and the predictability of the availability of these components may be limited, which may be heightened in light of Covid-19 safety measures undertaken in China, our principal country of manufacturing. In the event of a component shortage or supply interruption from suppliers of these components, we may experience supply chain delays. Developing alternate sources of supply for these components may be time-consuming, difficult, and costly, and we may not be able to source these components on terms that are acceptable to us, or at all, which may undermine our ability to fill our orders in a timely manner. Any interruption or delay in the supply of any of these parts or components, or the inability to obtain these parts or components from alternate sources at acceptable prices and within a reasonable amount of time, would harm our ability to timely ship our products to our customers.

 

In addition, substantially all of our components are shipped directly from our contract manufacturers to our warehouse facility in Miami or to a third-party optical laboratory in the United States, where lenses are cut and mounted into frames. These laboratories process most of the glasses ordered by our customers. Once processed at the laboratories, the finished products are then sorted and shipped using third-party carriers to our customers. Our eyeglasses are also shipped directly to our third-party distribution center in the United States for shipment directly to our customers and resellers. We depend in large part on the orderly operation of this distribution process, which depends, in turn, on adherence to shipping schedules and effective management of our optical laboratory network and third-party distribution center. Increases in transportation costs (including increases in fuel costs), issues with overseas shipments, supplier-side delays, as well as reductions in the transportation capacity of carriers, labor strikes or shortages in the transportation industry, disruptions to the national and international transportation infrastructure, and unexpected delivery interruptions or delays also have the potential to derail our distribution process.

 

 

Moreover, volatile economic conditions may make it more likely that our suppliers and logistics providers may be unable to timely deliver supplies, or at all, and there is no guarantee that we will be able to timely locate alternative suppliers of comparable quality at an acceptable price. In addition, international supply chains may be impacted by events outside of our control, including but not limited to the COVID-19 pandemic, and limit our ability to procure timely delivery of supplies or finished goods and services. We face additional risks related to the manufacturing facility we contract with in China and suppliers in China, including port of entry risks such as longshoremen strikes, import restrictions, foreign government regulations, trade restrictions, customs, and duties.

 

We source components from suppliers located in China. Effective September 1, 2019, the U.S. government implemented a 15% tariff on specified products imported into the U.S. from China and effective February 14, 2020, the 15% tariff was reduced to 7.5%. In June 2020, the U.S. government granted a temporary exclusion for plastic and metal frames with a retroactive effective date of September 1, 2019, and such exclusion expired in September 2020. Given the recent change in the U.S. presidential administration, there is uncertainty whether there will be, and the resulting impacts of, any changes to U.S. government trade policy. If we are unable to mitigate the full impact of the enacted tariffs or if there is a further escalation of tariffs, costs on a significant portion of our products may increase further and our financial results may be negatively affected. While it is too early to predict how the current and future China tariffs will impact our business, our financial results may also be impacted by any resulting economic slowdown.

 

The inability to fulfill, or any delays in processing, customer orders through third party optical laboratory optical laboratory could result in the loss of customers, issuances of refunds or credits, and may also adversely affect our income and reputation. The success of our retail and e-commerce sales depends on the timely receipt of products by our customers and any repeated, intermittent or long-term disruption in, or failures of, the operations of our distribution center and/or optical laboratories could result in lower sales and profitability, a loss of loyalty to our brands, and excess inventory.

 

Furthermore, increases in compensation, wage pressure, and other expenses for our employees, may adversely affect our profitability. Increases in minimum wages and other wage and hour regulations can exacerbate this risk. These cost increases may be the result of inflationary pressures which could further reduce our sales or profitability. Increases in other operating costs, may increase our cost of products sold or selling, general, and administrative expenses. Our competitive price model and pricing pressures in the optical retail industry may inhibit our ability to reflect these increased costs in the prices of our products, in which case such increased costs could have a material adverse effect on our business, financial condition, and results of operations.

 

We currently derive all of our revenue from sales of our glasses. A decline in sales of our eyewear would negatively affect our business, financial condition, and results of operations.

 

We derive all of our revenue from the sale of one product line, our Lucyd Lyte smart eyewear. Our glasses are sold in highly competitive markets with limited barriers to entry. Introduction by competitors of comparable products at lower price points, a maturing product lifecycle, a decline in consumer spending, or other factors could result in a material decline in our revenue. Because we derive most of our revenue from the sale of our glasses, any material decline in sales of our glasses would have a material adverse impact on our business, financial condition, and operating results.

 

We face significant risks due to our dependency on foreign supply and manufacturing chains, geopolitical and economic changes, and changes in public perception about internationally sourced and manufactured products.

 

Since our component materials are sourced in China, our production may face additional risks such as, but not limited to: increased shipping costs, imposition of additional import or trade restrictions, increased custom duties and tariffs, legal or economic restrictions on our supplier and manufacturer’s ability to meet our needs, unforeseen delays in customs clearance of goods, transportation delays, issues with ports of entry, new and adverse foreign government regulations, political instability, war, natural disasters, and overall economic uncertainty. Our overseas sourcing and manufacturing could also suffer due to health-related concerns surrounding infectious diseases, such as Covid-19 safety measures in China, our primary country of supply. Public opinion about internationally sourced and manufactured products could be changed by negative press, which could have an impact on our customers’ confidence and satisfaction and could also have a negative impact on our public image and brand perception.

 

 

If we fail to cost-effectively retain our existing customers or to acquire new customers, our business, financial condition, and results of operations would be harmed.

 

The growth of our business is dependent upon our ability to continue to grow by cost-effectively retaining our existing customers and adding new customers. Although we believe that many customers originate from word-of-mouth and paid and non-paid referrals, we expect to continue to expend resources and run marketing campaigns to acquire additional customers, all of which could impact our overall profitability. If we are not able to continue to expand our customer base, or fail to retain customers, our net revenue will grow slower than expected or decline.

 

The growth of our e-commerce channel is critical to our continued customer retention and growth. Historically, consumers have been slower to adopt online shopping for glasses than e-commerce offerings in other industries such as consumer electronics and apparel. Improving upon the consumer in-store experience through an online platform is difficult due to broad consumer demands on selection, quality, convenience, and affordability. Changing traditional optical retail habits is difficult, and if consumers and retailers do not embrace smart eyewear as we expect, our business and operations could be harmed.

 

Our ability to attract new customers and increase net revenue from existing customers also depends in large part on our ability to enhance and improve our existing products and to introduce new products and services, in each case, in a timely manner. We also must be able to identify and originate styles and trends as well as to anticipate and react to changing consumer demands in a timely manner. The success of new and/or enhanced products and services depends on several factors, including their timely introduction and completion, sufficient demand, and cost-effectiveness. New products that we develop may not be well received and could negatively impact our financial performance.

 

Our number of customers may decline materially or fluctuate as a result of many factors, including, among other things:

 

●

the quality, consumer appeal, price, and reliability of products and services offered by us;

 

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intense competition in the optical retail industry by better financed participants;

 

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negative publicity related to our brand or brand influencers;

 

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the impact of the COVID-19 pandemic or a future outbreak of disease or similar public health concern;

 

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customer dissatisfaction with changes we make to our products and services.

 

In addition, if we are unable to provide high-quality support to customers or help resolve issues in a timely and acceptable manner, our ability to attract new customers and retain customers could be adversely affected. If our number of customers declines or fluctuates for any of these reasons among others, our business would suffer.

 

Our profitability and cash flows may be negatively affected if we are not successful in managing our inventory balances and inventory shrinkage.

 

Efficient inventory management is a key component of our business success and profitability. To be successful, we must maintain sufficient inventory levels to meet our customers’ demands without allowing those levels to increase to such an extent that the costs to hold the goods unduly impact our financial results. We must balance the need to maintain inventory levels that are sufficient to ensure competitive lead times against the risk of inventory obsolescence because of changing customer requirements, fluctuating commodity prices, changes to our products, product transfers, or the life cycle of our products. If we fail to adequately forecast demand for any product, or fail to determine the optimal product mix for production purposes, we may face production capacity issues in processing sufficient quantities of a given product. If our buying and distribution decisions do not accurately predict customer trends or spending levels in general or if we inappropriately price products, we may have to record potential write-downs relating to the value of obsolete or excess inventory. Conversely, if we underestimate future demand for a particular product or do not respond quickly enough to replenish our best performing products, we may have a shortfall in inventory of such products, likely leading to unfulfilled orders, reduced net revenue, and customer dissatisfaction. In addition, because we source components from suppliers located in China, our inventory management may be impacted by enactment or further escalation of tariffs, import restrictions, foreign government regulations, trade restrictions, customs, and duties.

 

Maintaining adequate inventory requires significant attention and monitoring of market trends, local markets, developments with suppliers, and our distribution network, and it is not certain that we will be effective in our inventory management.

 

 

If we fail to maintain and enhance our brand, our ability to engage or expand our base of customers will be impaired, and our business, financial condition, and results of operations may suffer.

 

Maintaining and enhancing our appeal and reputation as a stylish, innovative, and coveted brand is critical to attracting and expanding our relationships with customers. The successful promotion of our brand and the market’s awareness of our products and services will depend on a number of factors, including our marketing efforts, ability to continue to develop our products and services, and ability to successfully differentiate our offerings from competitive offerings. We expect to invest substantial resources to promote and maintain our brand, but there is no guarantee that our brand development strategies will enhance the recognition of our brand or lead to increased sales. The strength of our brand will depend largely on our ability to provide stylish, technologically enhanced products and quality services at competitive prices. Brand promotion activities may not yield increased net revenue, and even if they do, the increased net revenue may not offset the expenses we incur in promoting and maintaining our brand and reputation. In order to protect our brand, we also plan to expend substantial resources to register and defend our trademarks and to prevent others from using the same or substantially similar marks. Despite these efforts, we and Lucyd Ltd. may not always be successful in protecting the trademarks we license from Lucyd Ltd. Our trademarks may be diluted, and we may suffer harm to our reputation, or other harm to our brand. If our efforts to cost-effectively promote and maintain our brand are not successful, our results of operations and our ability to attract and engage customers, partners, and employees may be adversely affected.

 

Unfavorable publicity regarding our products, customer service, or privacy and security practices could also harm our reputation and diminish confidence in, and the use of, our products and services. In addition, negative publicity related to key brands that we have partnered with may damage our reputation, even if the publicity is not directly related to us. If we fail to maintain, protect, and enhance our brand successfully or to maintain loyalty among customers, or if we incur substantial expenses in unsuccessful attempts to maintain, protect, and enhance our brand, we may fail to attract or increase the engagement of customers, and our business, financial condition, and results of operations may suffer.

 

We rely heavily on our information technology systems, as well as those of our third-party vendors, business partners, and service providers, for our business to effectively operate and to safeguard confidential information; any significant failure, inadequacy, interruption, or data security incident could adversely affect our business, financial condition, and operations.

 

We rely heavily on our in-house information technology and enterprise resource planning systems for many functions across our operations, including managing our supply chain and inventory, processing customer transactions in our stores, allocating lens processing jobs to the appropriate laboratories, our financial accounting and reporting, compensating our employees, and operating our website, mobile applications and in-store systems. Our ability to effectively manage our business and coordinate the manufacturing, sourcing, distribution, and sale of our products depends significantly on the reliability and capacity of these systems. We are critically dependent on the integrity, security, and consistent operations of these systems, which are highly reliant on the coordination of our internal business and engineering teams. We also collect, process, and store sensitive and confidential information, including our proprietary business information and that of our customers, employees, suppliers, and business partners. The secure processing, maintenance, and transmission of this information is critical to our operations.

 

Our systems may be subject to damage or interruption from power outages or damages, telecommunications problems, data corruption, software errors, network failures, acts of war or terrorist attacks, fire, flood, global pandemics, and natural disasters; our existing safety systems, data backup, access protection, user management, and information technology emergency planning may not be sufficient to prevent data loss or long-term network outages. In addition, we may have to upgrade our existing information technology systems or choose to incorporate new technology systems from time to time in order for such systems to support the increasing needs of our expanding business. Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology or with maintenance or adequate support of existing systems could disrupt or reduce the efficiency of our operations.

 

Our systems and those of our third-party service providers and business partners may be vulnerable to security incidents, attacks by hackers, acts of vandalism, computer viruses, misplaced or lost data, human errors or other similar events. If unauthorized parties gain access to our networks or databases, or those of our third-party service providers or business partners, they may be able to steal, publish, delete, use inappropriately, or modify our private and sensitive third-party information including personal health information, credit card information, and personal identification information. In addition, employees may intentionally or inadvertently cause data or security incidents that result in unauthorized release of personal or confidential information. Because the techniques used to circumvent security systems can be highly sophisticated, change frequently, are often not recognized until launched against a target, and may originate from less regulated and remote areas around the world, we may be unable to proactively address all possible techniques or implement adequate preventive measures for all situations.

 

 

Security incidents compromising the confidentiality, integrity, and availability of this information and our systems could result from cyber-attacks, computer malware, viruses, social engineering (including spear phishing and ransomware attacks), credential stuffing, supply chain attacks, efforts by individuals or groups of hackers and sophisticated organizations, including state-sponsored organizations, errors or malfeasance of our personnel, and security vulnerabilities in the software or systems on which we rely. We anticipate that these threats will continue to grow in scope and complexity over time and such incidents have occurred in the past, and may occur in the future, resulting in unauthorized, unlawful, or inappropriate access to, inability to access, disclosure of, or loss of the sensitive, proprietary and confidential information that we handle.

 

We also rely on a number of third-party service providers to operate our critical business systems, provide us with software, and process confidential and personal information, such as the payment processors that process customer credit card payments, which expose us to security risks outside of our direct control and our ability to monitor these third-party service providers’ data security is limited. These service providers could experience a security incident that compromises the confidentiality, integrity, or availability of the systems they operate for us or the information they process on our behalf. Cybercrime and hacking techniques are constantly evolving, and we or our third-party service providers may be unable to anticipate attempted security breaches, react in a timely manner, or implement adequate preventative measures, particularly given the increasing use of hacking techniques designed to circumvent controls, avoid detection, and remove or obfuscate forensic artifacts. While we have taken measures designed to protect the security of the confidential and personal information under our control, we cannot assure you that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats. Moreover, we or our third-party service providers may be more vulnerable to such attacks in remote work environments, which have increased in response to the COVID-19 pandemic.

 

A security breach may also cause us to breach our contractual obligations. Our agreements with certain customers, business partners, or other stakeholders may require us to use industry-standard or reasonable measures to safeguard personal information. We also may be subject to laws that require us to use industry-standard or reasonable security measures to safeguard personal information. A security incident could lead to claims by our customers, business partners, or other relevant stakeholders that we have failed to comply with such legal or contractual obligations. In addition, our inability to comply with data privacy obligations in our contracts or our inability to flow down such obligations to our vendors, collaborators, other contractors, or consultants may cause us to breach our contracts. As a result, we could be subject to legal action, or our customers or business partners could end their relationships with us. There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages.

 

In addition, any such access, disclosure or other loss or unauthorized use of information or data, whether actual or perceived, could result in legal claims or proceedings, regulatory investigations or actions, and other types of liability under laws that protect the privacy and security of personal information, including federal, state and foreign data protection and privacy regulations, violations of which could result in significant penalties and fines in the EU and United States. In addition, although we seek to detect and investigate all data security incidents, security breaches, and other incidents of unauthorized access to our information technology systems and data can be difficult to detect and any delay in identifying such breaches or incidents may lead to increased harm and legal exposure of the type described above.

 

The cost of investigating, mitigating, and responding to potential security breaches and complying with applicable breach notification obligations to individuals, regulators, partners, and others can be significant. Further, defending a suit, regardless of its merit, could be costly, divert management attention, and harm our reputation. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could adversely affect our reputation, business, financial condition, revenues, results of operations, or cash flows. Any material disruption or slowdown of our systems or those of our third-party service providers and business partners, could have a material adverse effect on our business, financial condition, and results of operations. Our risks are likely to increase as we continue to expand, grow our customer base, and process, store, and transmit increasing amounts of proprietary and sensitive data.

 

 

Our e-commerce and multichannel channel business faces distinct risks, and our failure to successfully manage it could have a negative impact on our profitability.

 

As an e-commerce and multichannel retailer, we encounter risks and difficulties frequently experienced by businesses with significant online and in-store sales. The successful operation of our business as well as our ability to provide a positive shopping experience that will generate orders and drive subsequent visits depends on efficient and uninterrupted operation of our e-commerce order-taking and fulfillment operations. If we are unable to allow real-time and accurate visibility to product availability when customers are ready to purchase, quickly and efficiently fulfill our customers’ orders using the fulfillment and payment methods they demand, provide a convenient and consistent experience for our customers regardless of the ultimate sales channel, or effectively manage our online sales, our ability to compete and our results of operations could be adversely affected. Risks associated with our e-commerce and multichannel business include:

 

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uncertainties associated with our websites, mobile applications and in-store virtual try-on kiosks including changes in required technology interfaces, website downtime and other technical failures, costs and technical issues as we upgrade our systems software, inadequate system capacity, computer viruses, human error, security breaches, legal claims related to our systems operations, and fulfillment;

 

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our partnership with select third-party apps, through which we sell a portion of our products, are subject to changes in their technology interfaces, website downtime and other technical failures, costs, and issues;

 

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disruptions in internet service or power outages;

 

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reliance on third parties for computer hardware and software, as well as delivery of merchandise to our customers;

 

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rapid technology changes;

 

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credit or debit card fraud and other payment processing related issues;

 

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cybersecurity and consumer privacy; and

 

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natural disasters or adverse weather conditions.

 

In addition, we must keep up to date with competitive technology trends, including the use of new or improved technology, creative user interfaces, virtual and augmented reality, and other e-commerce marketing tools such as paid search and mobile application, among others, which may increase our costs and which may not increase sales or attract customers. Our competitors, most of whom have significantly greater resources than we do, may also be able to benefit from changes in e-commerce technologies, which could harm our competitive position.

 

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards and changing customer needs or requirements, our solutions may become less competitive.

 

Our success depends on our customers’ willingness to adopt and use our products, as well as our ability to adapt and enhance our products. To attract new customers and increase revenue from existing customers, we need to continue to enhance and improve our products and to meet customer needs at prices that customers are willing to pay. Such efforts will require adding new features, expanding related applications and responding to technological advancements, which will increase our research and development costs. If we are unable to develop solutions that address customers’ needs or enhance and improve our platform in a timely manner, we may not be able to increase or maintain market acceptance of our products. Further, we may make changes to our products that customers do not find useful. We may also face unexpected problems or challenges in connection with new applications or feature introductions.

 

Moreover, many competitors expend a considerably greater amount of funds on their research and development programs, and those that do not may be acquired by larger companies that would allocate greater resources to competitors’ research and development programs. If we fail to compete effectively with the research and development programs of competitors, our business could be harmed. Our ability to grow is also subject to the risk of future disruptive technologies. If new technologies emerge that are able to deliver smart eyewear products at lower prices, more efficiently, more conveniently or more securely, such technologies could adversely affect our ability to compete.

 

 

We depend on highly skilled personnel to grow and operate our business, and if we are unable to hire, retain, and motivate our personnel, we may not be able to grow effectively.

 

Our success and future growth depend largely upon the continued services of our management team, including our Chief Executive Officer Harrison Gross. From time to time, there may be changes in our executive management team resulting from the hiring or departure of our executives. Our executive officers are employed on an at-will basis, which means they may terminate their employment with us at any time. The loss of one or more of our executive officers, or the failure by our executive team to effectively work with our employees and lead our company, could harm our business. We do not maintain key person life insurance with respect to any member of management or other employee.

 

In addition, our future success will depend, in part, upon our continued ability to identify and hire skilled employees with the skills and technical knowledge that we require, including software design and programming, eyewear design, marketing, merchandising, operations, and other key management skills and knowledge. Such efforts will require significant time, expense, and attention as there is intense competition for such individuals.

 

Certain technological advances, greater availability of, or increased consumer preferences for, vision correction alternatives to prescription eyeglasses or contact lenses, and future drug development for the correction of vision-related problems may reduce the demand for our products and adversely impact our business and profitability.

 

Technological advances in vision care, including the development of new or improved products, as well as future drug development for the correction of vision-related problems, could significantly change how vision care may be conducted and make our existing products less attractive or even obsolete. The greater availability and acceptance, or reductions in the cost, of vision correction alternatives to prescription eyeglasses and contact lenses, such as corneal refractive surgery procedures, including radial keratotomy, photorefractive keratotomy, or PRK, and LASIK, may reduce the demand for our products, lower our sales, and thereby adversely impact our business and profitability.

 

We could be adversely affected by product liability, product recall or personal injury issues.

 

We could be adversely impacted by the supply of defective products, including the infiltration of counterfeit products into the supply chain or product mishandling issues. Product liability or personal injury claims may be asserted against us with respect to any of the products we sell or services we provide.

 

If the products that we sell, including those that we process, package, or label, are defective or otherwise result in product liability or personal injury claims against us, our business could be adversely affected and we could be subject to adverse regulatory action. If our products or services do not meet applicable governmental safety standards or our customers’ expectations regarding quality or safety, we could experience lost sales and increased costs, be exposed to legal and reputational risk, and face fines or penalties which could materially adversely affect our financial results.

 

Refunds, cancellations, and warranty claims could harm our business.

 

We allow our customers to return our products, subject to our refund policy, which allows any customer to return our products for any reason and receive a full refund within the first 7 days for sales made through our website, 30 days for sales made through Amazon, and 30 days for sales to most wholesale retailers and distributors (although certain sales to independent distributors are ineligible for returns). At the time of sale, we establish a reserve for returns, based on historical experience and expected future returns, which is recorded as a reduction of sales. If we experience a substantial increase in refunds, our cancellation reserve levels might not be sufficient and our business, financial condition, and results of operations could be harmed.

 

 

We expect a number of factors to cause our results of operations and operating cash flows to fluctuate on a quarterly and annual basis, which may make it difficult to predict our future performance.

 

Our results of operations could vary significantly from quarter to quarter and year to year because of a variety of factors, many of which are outside of our control. As a result, comparing our results of operations on a period-to-period basis may not be meaningful. In addition to other risk factors discussed in this section, factors that may contribute to the variability of our quarterly and annual results include:

 

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our ability to accurately forecast and achieve net revenues and appropriately plan our expenses;

 

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changes to financial accounting standards and the interpretation of those standards, which may affect the way we recognize and report our financial results;

 

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the effectiveness of our internal controls;

 

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the early-stage nature of our business and the need to scale our operations and,

 

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the impact of the COVID-19 pandemic on our business.

 

The impact of one or more of the foregoing and other factors may cause our results of operations to vary significantly. As such, quarter-to-quarter and year-over-year comparisons of our results of operations may not be meaningful and should not be relied upon as an indication of future performance.

 

We may require additional capital to support the growth of our business, and this capital might not be available on acceptable terms, if at all.

 

We have funded our operations since inception primarily through net proceeds from the sale of convertible loan notes, common stock sales through two registered crowdfunds and our initial public offering. We cannot be certain when, or if, our operations will generate sufficient cash to fully fund our ongoing operations or the growth of our business. We intend to continue to make investments to support the development of our products and services and will require additional funds for such development. We may need additional funding for marketing expenses and to develop and expand sales resources, develop new products and improve existing products with new features or enhance our products and services with new technology, improve our operating infrastructure, or acquire complementary businesses and technologies. Accordingly, we might need or may want to engage in future equity or debt financings to secure additional funds. Additional financing may not be available on terms favorable to us, if at all. If adequate funds are not available on acceptable terms, we may be unable to invest in future growth opportunities, which could harm our business, financial condition, and results of operations. In particular, the ongoing COVID-19 pandemic has caused disruption in the credit and financial markets in the United States and worldwide, which may reduce our ability to access capital and negatively affect our liquidity in the future. If we are unable to obtain adequate financing or financing on terms satisfactory to us, our ability to develop our products and services, support our business growth, and respond to business challenges could be significantly impaired, and our business may be adversely affected.

 

If we incur additional debt, the debt holders would have rights senior to holders of common stock to make claims on our assets, and the terms of any additional debt could include restrictive covenants that restrict our operations, including our ability to pay dividends on our common stock. Furthermore, if we issue additional equity securities, stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because our decision to issue securities in the future will depend on numerous considerations, including factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future issuances of debt or equity securities. As a result, our stockholders bear the risk of future issuances of debt or equity securities reducing the value of our common stock and diluting their interests.

 

The occurrence of any of these foregoing risks could adversely affect our business, financial condition, and results of operations and expose us to unknown risks or liabilities.

 

 

Eyeglasses are regulated as medical devices by the FDA, and our failure, or the failure of any third-party manufacturer or optical laboratory, to obtain and maintain the necessary agency authorizations for our products could have a material adverse effect on our business.

 

We are an FDA registered eyewear importer, and we also engage in certain manufacturing, packaging, shipping and labeling activities that subject us and our overseas manufacturing partners to oversight by the FDA under the FDCA and its implementing regulations. The FDA regulates, among other things, with respect to medical devices: design, development and manufacturing, testing, labeling, content, and language of instructions for use and storage; clinical trials; product safety; establishment registration and device listing; marketing, sales and distribution; premarket clearance, classification and approval; recordkeeping procedures; advertising and promotion; recalls and field safety corrective actions; post market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; post-market approval studies; and product import and export. The regulations to which we are subject are simpler than most medical products due to the relatively low risk classification of eyewear—regularly, only our lenses are reviewed for FDA clearance. Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs, or lower than anticipated sales. The FDA enforces its regulatory requirements through, among other means, periodic unannounced inspections. Failure to comply with applicable regulations could jeopardize our or our contract manufacturers’ ability to manufacture and sell our products and result in FDA enforcement actions such as: warning letters; fines; injunctions; civil penalties; termination of distribution; recalls or seizures of products; delays in the introduction of products into the market; total or partial suspension of production; refusal to grant future clearances or approvals; withdrawals or suspensions of clearances or approvals, resulting in prohibitions on sales of our products; and in the most serious cases, criminal penalties.

 

Due to the nature of Vyrb as a social media application, and our collection of customer data in the process of taking orders, we are subject to rapidly changing and increasingly stringent laws, regulations, obligations, and industry standards relating to privacy, data security, and data protection. The restrictions and costs imposed by these laws and other obligations, or our actual or perceived failure to comply with them, could subject us to liabilities that adversely affect our business, operations, and financial performance.

 

We collect, process, store, and use a wide variety of data from current and prospective customers, including personal information, such as home addresses and geolocation, and health information related to their ophthalmic prescriptions. These activities are regulated by a variety of federal, state, local, and foreign privacy, data security, and data protection laws and regulations, which have become increasingly stringent in recent years.

 

Domestic privacy and data security laws are complex and changing rapidly. Many states have enacted laws regulating the online collection, use, and disclosure of personal information and requiring that companies implement reasonable data security measures. Laws in all states and U.S. territories also require businesses to notify affected individuals, governmental entities, and/or credit reporting agencies of certain security incidents affecting personal information. These laws are not consistent, and compliance with them in the event of a widespread data breach is complex and costly.

 

Further, the California Consumer Privacy Act (CCPA) took effect on January 1, 2020. The CCPA gives California residents expanded rights related to their personal information, including the right to access and delete their personal information, and receive detailed information about how their personal information is used and shared. The CCPA also created restrictions on “sales” of personal information that allow California residents to opt-out of certain sharing of their personal information and may restrict the use of cookies and similar technologies for advertising purposes. Our e-commerce platform, including our websites and mobile applications, rely on these technologies and could be adversely affected by the CCPA’s restrictions. The CCPA prohibits discrimination against individuals who exercise their privacy rights, provides for civil penalties for violations, and creates a private right of action for data breaches that is expected to increase data breach litigation. Additionally, a new California ballot initiative, the California Privacy Rights Act, or CPRA, was recently passed in California. The CPRA will restrict use of certain categories of sensitive personal information that we handle; further restrict the use of cross-context behavioral advertising techniques on which our products may rely in the future; establish restrictions on the retention of personal information; expand the types of data breaches subject to the private right of action; and establish the California Privacy Protection Agency to implement and enforce the new law, as well as impose administrative fines. The majority of the CPRA’s provisions will go into effect on January 1, 2023, and additional compliance investment and potential business process changes will likely be required. Similar laws have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States. Compliance with such laws could be difficult and costly to achieve and we could be subject to fines and penalties in the event of non-compliance.

 

 

Additionally, we are subject to certain health information privacy and security laws as a result of the health information that we receive in connection with our products and services. These laws and regulations include not be adequate to indemnify us for the full extent of our potential liabilities.

 

Finally, since the Vyrb social app allows users to create and share various types of multimedia content in a public space operated by the Company, the Company has a basic responsibility to ensure that illegal or otherwise personally harmful content is removed from the platform with speed, which if we fail to do so, could potentially result in legal action against the Company.

 

Our business could be adversely impacted by changes in the internet and mobile device accessibility of users. Companies and governmental agencies may restrict access to our products and services, our mobile applications, website, application stores, or the internet generally, which could negatively impact our operations.

 

Our business depends on customers accessing our products and services via a mobile device or a personal computer, and the internet. We may operate in jurisdictions that provide limited internet connectivity. Internet access and access to a mobile device or personal computer are frequently provided by companies with significant market power that could take actions that degrade, disrupt, or increase the cost of consumers’ ability to access our products and services. In addition, the internet infrastructure that we and our customers rely on in any particular geographic area may be unable to support the demands placed upon it and could interfere with the speed and availability of our products and services. Any such failure in internet or mobile device or computer accessibility, even for a short period of time, could adversely affect our results of operations.

 

Governmental agencies in any of the countries in which we or our customers are located could block access to or require a license for our mobile applications, website, or the internet generally for a number of reasons, including security, confidentiality, or regulatory concerns. In addition, companies may adopt policies that prohibit their employees from using our products and services. If companies or governmental entities block, limit, or otherwise restrict customers from accessing our products and services, our business could be negatively impacted, the number of customers could decline or grow more slowly, and our results of operations could be adversely affected.

 

We could incur significant liabilities related to, and significant costs in complying with, environmental, health, and safety laws and regulations.

 

Our operations are subject to various national, state, and local environmental, health, and safety laws and regulations that govern, among other things, the health and safety of our employees and the end-users of our products and the materials used in, and the recycling of, our products and their packaging. Non-compliance with, or liability related to, these laws and regulations, which tend to become more stringent over time, could result in substantial fines or penalties, injunctive relief, civil, or criminal sanctions, and could expose us to costs of investigation or remediation, as well as tort claims for property damage or personal injury.

 

In addition, a number of governmental authorities, both in the United States and abroad, have considered, and are expected to consider, legislation aimed at reducing the amount of plastic non-recyclable waste. Programs have included banning certain types of products, mandating certain rates of recycling and/or the use of recycled materials, imposing deposits or taxes on single-use plastic bags, paper bags, reusable bags, and packaging materials. Such legislation, as well as voluntary initiatives, aimed at reducing the level of plastic wastes could result in increased cost of packaging for our products or otherwise require us to alter our current packaging and bagging practices. Additional regulatory efforts addressing other environmental or safety concerns in the future could similarly impact our business, financial condition, and results of operations.

 

 

From time to time, we may be subject to legal proceedings, regulatory disputes, and governmental inquiries that could cause us to incur significant expenses, divert our management’s attention, and materially harm our business, financial condition, and operating results.

 

From time to time, we may be subject to claims, lawsuits, government investigations, and other proceedings involving products liability, competition and antitrust, intellectual property, privacy, false advertising, consumer protection, securities, tax, labor and employment, commercial disputes, and other matters that could adversely affect our business operations and financial condition. As we grow, we may see a rise in the number and significance of these disputes and inquiries. Litigation and regulatory proceedings may be protracted and expensive, and the results are difficult to predict. Certain of these matters include speculative claims for substantial or indeterminate amounts of damages and include claims for injunctive relief. Additionally, our litigation costs could be significant. Adverse outcomes with respect to litigation or any of these legal proceedings may result in significant settlement costs or judgments, penalties and fines, or require us to modify our products or services, all of which could negatively affect our revenue growth. The results of litigation, investigations, claims, and regulatory proceedings cannot be predicted with certainty, and determining reserves for pending litigation and other legal and regulatory matters requires significant judgment. There can be no assurance that our expectations will prove correct, and even if these matters are resolved in our favor or without significant cash settlements, these matters, and the time and resources necessary to litigate or resolve them, could harm our business, financial condition, and results of operations.

 

 

Risks Related to Intellectual Property

 

We license some of our technology from Lucyd Ltd., the majority stockholder of the Company, and our inability to maintain this license could materially affect our business, financial condition, and operating results.

 

Some of our current intellectual property is licensed from Lucyd Ltd., the majority stockholder of the Company, pursuant to a license agreement we entered into with Lucyd Ltd. on April 1, 2020 (the “License Agreement”). Pursuant to the License Agreement, we acquired an exclusive, worldwide license that is royalty-free, fully paid up, and perpetual license for the exclusive use of certain assets of Lucyd Ltd. related to Innovative Eyewear current products and trademarks. There can be no assurance that the license will not be terminated by Lucyd Ltd. and if we are unable to continue to license the technology (because of, for example, intellectual property infringement claims brought by third-parties against us or against Lucyd Ltd.) then our business, financial condition and operating results would be adversely affected. Please see “Business—Material Agreements” for a more complete description of the License Agreement.

 

Failure to adequately maintain and protect our intellectual property and proprietary rights could harm our brand, devalue our proprietary content, and adversely affect our ability to compete effectively.

 

Our success depends to a significant degree on Lucyd Ltd.’s ability to obtain, maintain, protect, and enforce our licensed intellectual property rights, including those in our proprietary technologies, know-how, and brand. To protect our rights to our intellectual property, we rely on a combination of patent, trademark, copyright and trade secret laws, domain name registrations, confidentiality agreements, and other contractual arrangements with our employees, affiliates, clients, strategic partners, and others. However, the protective steps we have taken and plan to take may be inadequate to deter misappropriation or other violation of or otherwise protect our intellectual property rights. We may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Effective patent, trademark, copyright, and trade secret protection may not be available to us or available in every jurisdiction in which we offer or intend to offer our services. Failure to adequately protect our intellectual property could harm our brand, devalue our proprietary technology and content, and adversely affect our ability to compete effectively. Further, even if we are successful, defending our intellectual property rights could result in the expenditure of significant financial and managerial resources, which could adversely affect our business, financial condition, and results of operations.

 

If we fail to protect our intellectual property rights adequately, our competitors may gain access to our licensed intellectual property and proprietary technology and develop and commercialize substantially identical offerings or technologies. Any patents, trademarks, copyrights, or other intellectual property rights that we have or may obtain may be challenged or circumvented by others or invalidated or held unenforceable through administrative process, including re-examination, inter partes review, interference and derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings), or litigation. There can be no assurance that our patent applications will result in issued patents and we may be unable to obtain or maintain patent protection for our technology. In addition, any patents issued from pending or future patent applications or licensed to us in the future may not provide us with claims sufficiently broad to provide meaningful competitive advantages or may be successfully challenged by third parties. There is also no guarantee that our pending trademark applications for any mark will proceed to registration; our pending applications may be opposed by a third party prior to registration; and even those trademarks that are registered could be challenged by a third party, including by way of revocation or invalidity actions. For example, we have registrations in a number of foreign countries in which we are not currently offering goods or services, and those registrations could be subject to invalidation proceedings if we cannot demonstrate use of the marks by the applicable use deadlines in those countries. In addition, because patent applications in the United States are currently maintained in secrecy for a period of time prior to issuance, and patent applications in certain other countries generally are not published until more than 18 months after they are first filed, and because publication of discoveries in scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the first creator of inventions covered by our pending patent applications or that we were the first to file patent applications on such inventions. To maintain a proprietary market position in foreign countries, we may seek to protect some of our proprietary inventions through foreign counterpart patent applications. Statutory differences in patentable subject matter may limit the protection we can obtain on some of our inventions outside of the United States. The diversity of patent laws may make our expenses associated with the development and maintenance of intellectual property in foreign jurisdictions more expensive than we anticipate. We probably will not be able to obtain the same patent protection in every market in which we may otherwise be able to potentially generate revenue. Further, the laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. Moreover, policing unauthorized use of our technologies, trade secrets, and intellectual property may be difficult, expensive, and time-consuming. Despite our precautions, it may be possible for unauthorized third parties to copy our offerings and capabilities and use information that we regard as proprietary to create offerings that compete with ours. Third parties may apply to register our trademarks or other trademarks similar to our trademarks in jurisdictions before us, thereby creating risks relating to our ability to use and register our trademarks in those jurisdictions. In addition, there could be potential trade name or trademark ownership or infringement claims brought by owners of other rights, including registered trademarks, in our marks or marks similar to ours. Any claims of infringement, brand dilution, or consumer confusion related to our brand (including our trademarks) or any failure to renew key license agreements on acceptable terms could damage our reputation and brand identity and substantially harm our business and results of operations. The value of our intellectual property could diminish if others assert rights in or ownership of our trademarks and other intellectual property rights, or trademarks that are similar to our trademarks. We may be unable to successfully resolve these types of conflicts to our satisfaction. In some cases, litigation or other actions may be necessary to protect or enforce our trademarks and other intellectual property rights.

 

 

We generally enter into confidentiality and invention assignment agreements with our employees and consultants, as well as confidentiality agreements with other third parties, including suppliers and other partners. However, we cannot guarantee that we have entered into such agreements with each party that has or may have had access to our proprietary information, know-how, and trade secrets. Moreover, no assurance can be given that these agreements will be effective in controlling access to our proprietary information or the distribution, use, misuse, misappropriation, reverse engineering, or disclosure of our proprietary information, know-how, and trade secrets. Further, these agreements may not prevent our competitors from independently developing technologies that are substantially equivalent or superior to our offerings and capabilities. These agreements may be breached, and we may not have adequate remedies for any such breach.

 

We may be required to spend significant resources to monitor and protect our intellectual property rights. Litigation may be necessary in the future to enforce our intellectual property rights and to protect our trade secrets. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming, and distracting to management, and could result in the impairment or loss of portions of our intellectual property rights. Further, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims, and countersuits attacking the validity and enforceability of our intellectual property rights, and if such defenses, counterclaims, or countersuits are successful, we could lose valuable intellectual property rights. Further, any changes in law or interpretation of any such laws, particularly intellectual property laws, may impact our ability to protect, register, or enforce our intellectual property rights. Our inability to protect our proprietary technology against unauthorized copying or use, as well as any costly litigation or diversion of our management’s attention and resources, could delay further sales or the implementation of our offerings and capabilities, impair the functionality of our offerings and capabilities, delay introductions of new offerings, result in our substituting inferior or more costly technologies into our offerings, or injure our reputation.

 

Domain names generally are regulated by internet regulatory bodies, and the regulation of domain names is subject to change. Regulatory bodies have and may continue to establish additional top-level domains, appoint additional domain name registrars, or modify the requirements for holding domain names. We may not be able to, or it may not be cost-effective to, acquire or maintain all domain names that utilize the name “Lucyd Ltd.” or “Innovative Eyewear” in all of the countries in which we currently conduct or intend to conduct business. If we lose the ability to use a domain name, we could incur significant additional expenses to market our products within that country, including the development of new branding. This could substantially harm our business, results of operations, financial condition and prospects.

 

We may incur costs to defend against, face liability or for being vulnerable to intellectual property infringement claims brought against us by others.

 

Third parties may assert claims against us alleging that we infringe upon, misappropriate, dilute or otherwise violate their intellectual property rights, particularly as we expand our business and the number of products we offer. These risks have been amplified by the increase in third parties whose sole or primary business is to assert such claims. We may be particularly vulnerable to such claims, as companies having a substantial online presence are frequently subject to litigation based on allegations of infringement or other violations of intellectual property rights. As we gain an increasingly high public profile, the possibility of intellectual property rights claims against us grows. Our competitors and others may now and in the future have significantly larger and more mature patent portfolios than us.

 

We rely on contracts and releases for ownership of copyrighted materials and the right to use images of individuals on our webpage and marketing material, and we may be subject to claims that we did not properly obtain rights, consent, a release, or permission to use certain content or imagery. Many potential litigants have the ability to dedicate substantial resources to the assertion of their intellectual property rights. Any claim of infringement by a third party, even those without merit, could cause us to incur substantial costs defending against the claim, could distract our management from our business, could require us to cease use of such intellectual property, and could create ongoing obligations if we are subject to agreements or injunctions (stipulated or imposed) preventing us from engaging in certain acts. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, we risk compromising our confidential information during this type of litigation. Our defense of any claim, regardless of its merit, could be expensive and time consuming and could divert management resources. We cannot predict the outcome of lawsuits and cannot ensure that the results of any such actions will not have an adverse effect on our business, financial condition, or results of operations. Successful infringement claims against us could result in significant monetary liability or prevent us from selling some of our products. In addition, resolution of claims may require us to redesign or rebrand our products, license rights from third parties on potentially unfavorable terms, cease using certain brand names or other intellectual property rights altogether, make substantial payments for royalty or license fees, legal fees, settlement payments or other costs or damages, or admit liability. Such outcomes could encourage others to bring claims against us. To the extent we seek a license to continue offerings or operations found or alleged to infringe third-party intellectual property rights, such a license may be non-exclusive, and therefore our competitors may have access to the same technology licensed to us. In the event we are required to develop alternative, non-infringing technology, this could require significant time (during which we would be unable to continue to offer our affected offerings), effort and expense, and may ultimately not be successful. Any of these events could harm our business and cause our results of operations, liquidity, and financial condition to suffer. 

 

 

Risks Related to Our Dependence on Third Parties

 

We face risks associated with suppliers from whom our products are sourced and are dependent on a limited number of suppliers.

 

We purchase all of the inputs for our products, including eyeglass frames, temples with electronics embedded within them, prescription lenses, sun lenses, demo lenses, hinges, packaging materials and other components, parts, and raw materials, directly or indirectly from domestic and international suppliers. For our business to be successful, our suppliers must be willing and able to provide us with inputs in substantial quantities, in compliance with regulatory requirements, at acceptable costs and on a timely basis. Our ability to obtain a sufficient selection or volume of inputs on a timely basis at competitive prices could suffer as a result of any deterioration or change in our supplier relationships or events that adversely affect our suppliers.

 

We typically do not enter into long-term contracts with our suppliers and, as such, we operate without significant contractual assurances of continued supply, pricing or access to inputs. Any of our suppliers could discontinue supplying us with desired inputs in sufficient quantities or offer us less favorable terms on future transactions for a variety of reasons. The benefits we currently experience from our suppliers’ relationships could be adversely affected if our suppliers:

 

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discontinue selling products to us;

 

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raise their prices;

 

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increase lead times for products and/or key components

 

We also source inputs directly from suppliers outside of the United States, including China. Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control including increased shipping costs, the imposition of additional import or trade restrictions, including legal or economic restrictions on overseas suppliers’ ability to produce and deliver inputs, increased custom duties and tariffs, unforeseen delays in customs clearance of goods, more restrictive quotas, loss of a most favored nation trading status, currency exchange rates, transportation delays, port of entry issues and foreign government regulations, political instability, and economic uncertainties in the countries from which we or our suppliers source our products.

 

Additionally, sourcing could be impacted by current and future travel restrictions and/or the shut-down of certain businesses globally due to the COVID-19 pandemic.

 

We rely on a limited number of contract manufacturers and logistics partners for our products. A loss of any of these partners could negatively affect our business.

 

We rely on a limited number of third-party suppliers and contract manufacturers for the components that go into the manufacturing of our products. In particular, our frames are provided by only a handful of suppliers. We also assemble and fulfill prescription glasses at a single third-party optical laboratory. Our reliance on a limited number of contract manufacturers and logistics partners for our products increases our risks of being unable to deliver our products in a timely and cost-effective manner. In the event of interruption from any of our contract manufacturers or our own fulfillment capabilities, we should be able to increase capacity from other sources or develop alternate or secondary sources without incurring material additional costs or substantial delays.

 

Our business could be adversely affected if one or more of our manufacturers is impacted by a natural disaster, an epidemic such as COVID-19, or other interruption at a particular location. In particular, the ongoing COVID-19 pandemic has caused, and will likely continue to cause, interruptions in the development, manufacturing (including the sourcing of key components), and shipment of our products, which could adversely impact our revenue, gross margins, and operating results.

 

 

Additionally, we do not own or operate a warehouse or a warehouse management company or system, and we currently rely on three third-party warehouses. Because a significant percentage of our products are stored in and shipped out of third-party warehouses, we face significant risks such as, but not limited to: our operations could be disrupted and our inventory could be destroyed by earthquakes, floods, fires or other natural disasters or other events outside of our control, or the control of our third-party warehouse. Our dependence on third-party warehouses also exposes us to the risk that the warehouse may experience operational disruptions due to security or computer viruses, software and hardware failure, power interruptions and other system failures. If we encounter problems with our third-party warehouse, we may be unable to meet customer expectations, manage our inventory and fulfillment capacity, complete sales, fulfill orders in a timely fashion, and our ability to achieve objectives for operating efficiencies could be adversely affected, all of which could harm our reputation and our relationship with our customers.

 

Our projects could be hindered due to our dependence on third parties to complete many of our contracts.

 

In the current economic environment, third parties may find it difficult to obtain sufficient financing to help fund their operations. The inability to obtain financing could adversely affect a third party’s ability to provide materials, equipment or services which could have a material adverse impact on our business, financial condition, and results of operations. In addition, a failure by a third-party subcontractor, supplier or manufacturer to comply with applicable laws, regulations or client requirements could negatively impact our business and, for government clients, could result in fines, penalties, suspension or even debarment being imposed on us, which could have a material adverse impact on our business, financial condition, and results of operations.

 

We depend on search engines, social media platforms, digital application stores, content-based online advertising, and other online sources to attract consumers to and promote our website and our mobile applications, which may be affected by third-party interference beyond our control and as we grow our customer acquisition costs may rise.

 

Our success depends in part on our ability to attract consumers to our website, mobile applications, and retail partners to convert them into customers in a cost-effective manner. We depend, in large part, on search engines, social media platforms, digital application stores, content-based online advertising, and other online sources for traffic to our website, mobile applications, and select application partners.

 

With respect to search engines, we are included in search results as a result of both paid search listings, where we purchase specific search terms that result in the inclusion of our advertisement, and free search listings, which depend on algorithms used by search engines. For paid search listings, if one or more of the search engines or other online sources on which we rely for purchased listings modifies or terminates its relationship with us, our expenses could rise, we could lose consumers and traffic to our website could decrease, any of which could have a material adverse effect on our business, financial condition, and results of operations.

 

We plan to rely primarily on third-party insurance policies to insure our operations-related risks. If our insurance coverage is insufficient for the needs of our business or our insurance providers are unable to meet their obligations, we may not be able to mitigate the risks facing our business, which could adversely affect our business, financial condition, and results of operations.

 

We procure third-party insurance policies or plan to procure policies to cover various operations-related risks including employment practices liability, workers’ compensation, property and business interruptions, cybersecurity and data breaches, crime, directors’ and officers’ liability, and general business liabilities. We rely on a limited number of insurance providers, and should such providers discontinue or increase the cost of coverage, we cannot guarantee that we would be able to secure replacement coverage on reasonable terms or at all. If our insurance carriers change the terms of our policies in a manner not favorable to us, our insurance costs could increase. Further, if the insurance coverage we maintain is not adequate to cover losses that occur, or if we are required to purchase additional insurance for other aspects of our business, we could be liable for significant additional costs. Additionally, if any of our insurance providers becomes insolvent, it would be unable to pay any operations-related claims that we make.

 

 

General Risk Factors

 

Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

 

Since the completion of our initial public offering in August 2022, we have been required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. Though we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, we are not required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. As an “emerging growth company,” as defined in the JOBS Act, we may take advantage of certain temporary exemptions from various reporting requirements, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes Oxley Act (and the rules and regulations of the Securities and Exchange Commission thereunder). Once we no longer qualify as an “emerging growth company” under the JOBS Act and lose the ability to rely on the exemptions related thereto discussed above and depending on our status as per Rule 12b-2 of the Securities Exchange Act of 1934, as amended, our independent registered public accounting firm may also need to attest to the effectiveness of our internal control over financial reporting under Section 404.

 

Based on the number of personnel available to serve the Company’s accounting function, management believes we are not able to adequately segregate responsibility over financial transaction processing and reporting. Further, the Company does not have a formal internal control environment in place and operating effectively. As such, we have identified these issues as material weaknesses in our internal control over financial reporting and insufficient controls with respect to revenue recognition, and we may identify additional material weaknesses in the future that may cause us to fail to meet our reporting obligations or result in material misstatements of our financial statements. If our remediation of such material weaknesses is not effective, or if we fail to develop and maintain an effective system of internal controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be materially and adversely affected and the market price of our common stock could be negatively affected, which could require additional financial and management resources.

 

Changes in tax treatment of companies engaged in e-commerce may adversely affect the commercial use of our sites and our financial results.

 

Due to the global nature of the Internet, it is possible that various states or foreign countries might attempt to impose additional or new regulation on our business or levy additional or new sales, income, or other taxes relating to our activities. Tax authorities at the international, federal, state, and local levels are currently reviewing the appropriate treatment of companies engaged in e-commerce and digital services. New or revised international, federal, state, or local tax regulations or court decisions may subject us or our customers to additional sales, income and other taxes. For example, on June 21, 2018, the U.S. Supreme Court rendered a 5-4 majority decision in South Dakota v. Wayfair Inc., 17-494 where the Court held, among other things, that a state may require an out-of-state seller with no physical presence in the state to collect and remit sales taxes on goods the seller ships to consumers in the state, overturning existing court precedent. Other new or revised taxes and, in particular, digital taxes, sales taxes, VAT, and similar taxes could increase the cost of doing business online and decrease the attractiveness of selling products over the Internet. New taxes and rulings could also create significant increases in internal costs necessary to capture data and collect and remit taxes. Any of these events could have a material adverse effect on our business, financial condition, and operating results.

 

 

An overall decline in the health of the economy and other factors impacting consumer spending, such as recessionary conditions, governmental instability, inclement weather, and natural disasters, may affect consumer purchases, which could reduce demand for our products and harm our business, financial conditions, and results of operations.

 

Our business depends on consumer demand for our products and, consequently, is sensitive to a number of factors that influence consumer confidence and spending, such as general economic conditions, consumer disposable income, energy and fuel prices, recession and fears of recession, unemployment, minimum wages, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, tax rates and policies, inflation, consumer confidence in future economic conditions and political conditions, war and fears of war, inclement weather, natural disasters, terrorism, outbreak of viruses or widespread illness, and consumer perceptions of personal well-being and security. However, as eyewear is a necessary medical device for a large segment of the population, we believe our business is more insulated from economic forces compared to other consumer electronics.

 

We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

 

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including the auditor attestation requirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Pursuant to Section 107 of the JOBS Act, as an emerging growth company, we have elected to use the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards that are applicable to public companies, which may make our common stock less attractive to investors. In addition, if we cease to be an emerging growth company, we will no longer be able to use the extended transition period for complying with new or revised accounting standards.

 

We will remain an emerging growth company until the earliest of: (1) the last day of the fiscal year following the fifth anniversary of our listing; (2) the last day of the first fiscal year in which our annual gross revenue is $1.235 billion or more; (3) the date on which we have, during the previous rolling three-year period, issued more than $1 billion in non-convertible debt securities; and (4) the date on which we are deemed to be a “large accelerated filer” under the rules of the SEC.

 

We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. For example, if we do not adopt a new or revised accounting standard, our future results of operations may not be comparable to the results of operations of certain other companies in our industry that adopted such standards. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

 

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected.

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes appearing elsewhere in this prospectus. We base our estimates on short duration historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses. Significant estimates and judgments involve: inventory valuation; intangible assets; income taxes; valuation of our common stock and equity awards; revenue recognition, including revenue-related reserves; shipping and handling; and the computation of earnings/loss per share. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.

 

 

Our current insurance coverage may not be adequate, and we may not be able to obtain insurance at acceptable rates, or at all.

 

We currently have General Liability and Product Liability policies covering our business. These policies may not provide sufficient coverage in the face of significant claims or multiple claims. Claims exceeding our insurance coverage could create significant increases in internal costs. This even could have a material adverse effect on our business, financial condition, and operating results.

 

We may decide to pursue strategic licensing deals to accelerate our growth. These potential brand acquisitions may not be successful. We may not be able to successfully integrate future IP acquisitions or generate sufficient revenues from future acquisitions, which could cause our business to suffer.

 

If we license an intellectual property (IP) from a company, there can be no assurance that we will be able to profitably manage this intellectual property or successfully integrate a new business unit without substantial costs, delays or other operational or financial problems. There can be no assurance that the IP we acquire in the future will achieve anticipated revenues and earnings. Additionally:

 

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the key personnel operating the acquired IP may decide not to work with us;

 

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we may be unable to maintain uniform standards, controls, procedures and policies among acquired IPs;

 

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we may be unable to successfully implement infrastructure, logistics and systems integration;

 

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we may be held liable for legal claims (including environmental claims) arising out of activities of the acquired IP prior to our acquisitions, some of which we may not have discovered during our due diligence, and we may not have indemnification claims available to us or we may not be able to realize on any indemnification claims with respect to those legal claims;

 

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we will assume risks associated with deficiencies in the internal controls of acquired IPs;

 

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we may not be able to realize the cost savings or other financial benefits we anticipated; and

 

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our ongoing business may be disrupted or receive insufficient management attention.

 

Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on attractive terms. Moreover, to the extent an acquisition transaction financed by non-equity consideration results in additional goodwill, it will reduce our tangible net worth, which might have an adverse effect on our credit and bonding capacity.

 

 

Risks Related to Our Common Stock

 

Our directors, executive officers and principal stockholders have substantial control over our company, which could limit your ability to influence the outcome of key transactions, including a change of control.

 

Our executive officers, directors and principal stockholders and their affiliates own 5,189,085 shares of our common stock, or approximately 62% of the outstanding shares of our common stock, based on the number of shares outstanding as of May 17, 2023. As a result, these stockholders are able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors and the approval of mergers, acquisitions or other extraordinary transactions. They may also have interests that differ from yours and may vote in a way with which you disagree and which may be adverse to your interests. This concentration of ownership may have the effect of delaying, preventing or deterring a change of control of our company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company and might ultimately affect the market price of our common stock.

 

Lucyd Ltd., our principal stockholder, beneficially owns greater than 50% of our outstanding shares of common stock, which causes us to be deemed a “controlled company” under the rules of NASDAQ.

 

Lucyd Ltd. currently controls approximately 62% of the voting power of our capital stock. As a result, Lucyd Ltd. owns more than 50% of our outstanding shares and as such, we are a “controlled company” under the rules of NASDAQ. Under these rules, a company of which more than 50% of the voting power is held by an individual, a group or another company is a “controlled company” and, as such, can elect to be exempt from certain corporate governance requirements, including requirements that:

 

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a majority of the Board of Directors consist of independent directors;

 

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the board maintain a nominations committee with prescribed duties and a written charter; and

 

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the board maintain a compensation committee with prescribed duties and a written charter and comprised solely of independent directors.

 

As a “controlled company,” we may elect to rely on some or all of these exemptions, however, we do not intend take advantage of any of these exemptions. Despite the fact we do not intend to take advantage of these exemptions, our status as a “controlled company” could make our common stock less attractive to some investors or otherwise harm our stock price.

 

Separately, although our audit committee is currently in compliance and we intend to maintain compliance with NASDAQ rules, we are permitted to phase-in our compliance with the independent audit committee requirements set forth in NASDAQ rules, as follows: (1) one independent member of the audit committee at the time of listing, (2) a majority of independent members of the audit committee within 90 days of listing, and (3) all independent members of the audit committee (i.e., at least three members) within one year of listing. During these phase-in periods, our stockholders would not have the same protections afforded to stockholders of companies who have more ‘independent’ members of its audit committee and, if, within the phase-in periods, we are not able to recruit additional directors who would qualify as independent, or otherwise comply with the NASDAQ listing requirements, we may be subject to enforcement actions by NASDAQ.

 

We do not intend to pay dividends for the foreseeable future.

 

We have never declared or paid any cash dividends on our capital stock, and we do not intend to pay any cash dividends in the foreseeable future. We expect to retain future earnings, if any, to fund the development and growth of our business. Any future determination to pay dividends on our capital stock will be at the discretion of our board of directors. Accordingly, you must rely on the sale of your common stock after price appreciation, which may never occur, as the only way to realize any future gain on your investment.

 

 

Our quarterly operating results may fluctuate significantly and could fall below the expectations of securities analysts and investors due to the introduction of technologically more advanced products, seasonality and other factors, some of which are beyond our control, resulting in a decline in our stock price.

 

Our quarterly operating results may fluctuate significantly because of several factors, including:

 

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labor availability and costs for hourly and management personnel;

 

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changes in interest rates;

 

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macroeconomic conditions, both nationally and locally;

 

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changes in consumer preferences and competitive conditions;

 

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expansion to new markets;

 

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weather conditions in the regions we operate;

 

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increases in infrastructure costs; and

 

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fluctuations in commodity prices.

 

Unanticipated fluctuations in our quarterly operating results could result in a decline in our stock price.

 

Our failure to meet the continued listing requirements of NASDAQ could result in a de-listing of our common stock and Listed Warrants.

 

If we fail to satisfy the continued listing requirements of NASDAQ, such as the corporate governance requirements or the minimum closing bid price requirement, NASDAQ may take steps to de-list our common stock and Listed Warrants. Such a de-listing would likely have a negative effect on the price of our common stock and Listed Warrants and would impair your ability to sell or purchase our common stock and Listed Warrants when you wish to do so. In the event of a de-listing, we would take actions to restore our compliance with NASDAQ’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock and Listed Warrants to become listed again, stabilize the market price or improve the liquidity of our common stock and Listed Warrants, prevent our common stock and Listed Warrants from dropping below the NASDAQ minimum bid price requirement or prevent future non-compliance with NASDAQ’s listing requirements.

 

If our shares are delisted from NASDAQ and become subject to the penny stock rules, it would become more difficult to trade our shares.

 

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not obtain or retain a listing on NASDAQ and if the price of our common stock is less than $5.00, our common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

 

 

Use of Proceeds

 

We will not receive any proceeds from the sale of the common stock by the selling stockholders. We may receive proceeds upon the exercise of the April Warrants (to the extent the registration statement of which this prospectus is a part is then effective and, if applicable, the “cashless exercise” provision is not utilized by the holder). Any proceeds will be used for general corporate and working capital or for other purposes that the Board of Directors, in their good faith, deems to be in the best interest of the Company. No assurances can be given that any of such April Warrants will be exercised.

 

 

DETERMINATION OF OFFERING PRICE

 

The selling stockholders will offer common stock at the prevailing market prices or privately negotiated price.

 

The offering price of our common stock by the selling stockholders does not necessarily bear any relationship to our book value, assets, past operating results, financial condition or any other established criteria of value. The facts considered in determining the offering price were our financial condition and prospects, our limited operating history and the general condition of the securities market.

 

In addition, there is no assurance that our common stock will trade at market prices in excess of the offering price as prices for common stock in any public market will be determined in the marketplace and may be influenced by many factors, including the depth and liquidity.

 

 

MARKET INFORMATION FOR SECURITIES AND DIVIDEND POLICY

 

Our common stock and our Listed Warrants are currently listed on Nasdaq under the symbols “LUCY” and “LUCYW,” respectively. The last reported sale price of our common stock Nasdaq on May 17, 2023 was $2.19 per share of common stock 

 

Holders of Record

 

As of May 17, 2023, we had approximately 3,961 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, this number is not indicative of the total number of stockholders represented by these stockholders of record.

 

Dividends

 

We have not declared or paid dividends to stockholders since inception and do not plan to pay cash dividends in the foreseeable future. We currently intend to retain earnings, if any, to finance our growth.

 

Issuer Purchases of Equity Securities

 

None

 

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

You should read the following discussion and analysis of our financial condition and results of operations together with the accompanying “Index to Consolidated Financial Statements” included within this Registration Statement on Form S-1. Data as of and for the periods ended December 31, 2022 and 2021 has been derived from our audited financial statements appearing at the end of this prospectus. Data as of and for the three months ended March 31, 2023 and 2022 has been derived from our unaudited condensed financial statements appearing at the end of this prospectus. Results for any interim period should not be construed as an inference of what our results would be for any full fiscal year or future period. This discussion and other parts of this prospectus contain forward-looking statements, such as those relating to our plans, objectives, expectations, intentions, and beliefs, which involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors” included elsewhere in this prospectus.

 

Overview

 

We develop and sell smart eyeglasses and sunglasses, which are designed to allow our customers to remain connected to their digital lives, while also offering vision correction and protection. Our flagship product, Lucyd Lyte, enables the wearer to listen to music, take and make calls, and use voice assistants to perform many common smartphone tasks hands-free. Innovative Eyewear owns the exclusive rights to the Lucyd brand and the Lyte product line.

 

The mission of our company is to upgrade the world’s eyewear, by adding useful tech features to comfortable and stylish sunglasses and eyeglasses. Our products enable seamless Bluetooth connection to your digital life and prescription vision correction in one affordable and convenient package. Our flagship brand of smart eyewear is called Lucyd, and Lucyd eyewear is enjoyed by thousands of people around the world who want the convenience and utility of wireless headphones and glasses in one. Furthermore, we are revolutionizing the concept of eyewear overall, by enabling connection to the powerful ChatGPT AI assistant right on our glasses, using a novel and ergonomic voice interface. The Company believes the advent of this powerful feature to our eyewear will significantly enhance user adoption of Lucyd frames, and will provide a new revenue stream for the business in the form of in-app purchases.

 

Since the launch of Lucyd Lyte, we have witnessed interest and demand from customers throughout the United States and have sold thousands of our smart eyeglasses. Within six months of the launch of Lucyd Lyte, several optical stores in the United States and Canada onboarded the product and we have had discussions with several other large eyewear chains (by number of locations) regarding retailing our product in both traditional eyewear and sporting goods locations. Our early partnerships include selling through BestBuy.com and DicksSportingGoods.com, and we are developing long-standing relationships with these retailers in an effort to bring the smart eyewear product category to mainstream retail. We believe smart eyewear is a product category whose time has come, and we believe we are well positioned to capitalize on and help develop this exciting new sector – where vision correction and protection meets fashion meets connectivity in a user-friendly, mass market format, priced similarly to designer eyewear.

 

All of our products are designed in Miami, manufactured in Asia, and currently sold through two major types of channels:

 

1.

e-commerce, primarily via our website (Lucyd.co) and marketplaces such as Amazon, Bestbuy.com, and DicksSportingGoods.com; and

 

2.

a growing network of independent eyewear and sporting goods stores.

 

We apply a manufacturer suggested retail price (“MSRP”) of $199 (for our standard frames) to $229 (for our titanium frames) for non-prescription, polarized sunglass and blue light blocking glasses across our online channels, with our wholesale pricing offering volume discounts to these prices. Please refer to discussion in the Components of Results of Operations section below for more details regarding our pricing structure.

 

Our business model is capital light, as we have elected not to build our own manufacturing facilities and Company-owned retail distribution, but rather have contracted with existing sources of production and proven consumer-facing retail distribution.

 

 

Key Factors Affecting Performance

 

Expansion of retail points of purchase

 

In addition to sustained growth of our e-commerce business, our future revenues are correlated positively with our placement of Lucyd glasses in optical stores, as well as sporting goods stores and other specialty stores such as cellular shops. To address this, we assembled a team with decades of experience in the eyewear industry and are offering a strong co-op marketing program and reordering incentives program. We currently offer an expansive line of 16 different styles and several accessories, with plans to continuously expand this offering over time.

 

Retail store client retention and re-orders

 

Our ability to sustain and increase revenue is correlated positively with our ability to receive re-orders from stores, either directly or through our wholesale distributors. To support our sales to retail stores directly, we offer a strong co-op marketing program that includes free and paid store display materials. As part of this strategy, we have launched the Lucyd Digital Try-on Display for our resellers to help educate their in-store customers about Lucyd Lyte and enable customers to try them on virtually. This proprietary virtual try on software and display is central to our efforts to introduce traditional retail customers to Lucyd eyewear, and we are planning further enhancements to our merchandising displays to enable more immersive experiences.

 

Investing in business growth

 

We believe that people care about what they wear on their faces, and because we understand that customers have diverse preferences about the shape, size and design of their eyewear, we aim to continuously invest in the design and development of new models in an effort to provide the consumer with a wide selection of styles, colors and finishes.

 

We are offering a strong co-op marketing program with retail stores, and intend to expand our sales, marketing and brand ambassador teams to broaden our brand awareness and online presence. We will also increase our general and administrative expenses in the foreseeable future to cover the additional costs for finance, compliance, supply chain, quality assurance and investor relations as we grow as a public company.

 

Key Performance Indicators

 

Store Count (B2B)

 

We believe that one of the key indicators for our business is the number of retail stores onboarded to sell Lucyd Lyte. We started onboarding our first retail stores in June 2021. Currently, we have over 280 retail stores selling Lucyd Lyte primarily in the United States and Canada, across 230 unique wholesale accounts. This represents a growth of 50 new wholesale accounts in the first quarter of 2023, primarily across independent optical stores, optical buying groups and regional optical chains. Based on the existing demand for our products, current distribution and recently consummated supply agreements, we anticipate that our products will be available in a significant number of new third-party retail locations in 2023.

 

We expect this number to gradually increase as we continue to improve our product, roll out our co-op marketing program and introduce more of our virtual try-on kiosks into retail stores, to facilitate customer education and product sell-through.

 

Customer Ratings (B2C)

 

The Lucyd Lyte 2.0 product is receiving significantly higher ratings online compared to our previous products, indicating that customers are appreciative of improvements in product design, functionality and build quality. 14 out of 15 of the sunglass styles on Amazon carry a 4.3/5 rating or higher, compared to most products with an approximate 3.5/5 rating from our previous collection. We believe this is a very strong signal of early positive feedback on our products that indicates our ability to grow and scale with America’s largest online retailer and other platforms.

 

 

Number of online orders (B2C)

 

For our e-commerce business, we track the number of online orders as an indicator of the success of our online marketing efforts. As of March 31, 2023, we received a total of 13,174 orders from customers online. We believe that the addition of new styles, as well as further investment in brand awareness, product ambassadors, and influencer campaigns, will enable continued growth of online orders in the foreseeable future. We expect to allocate a significant portion of our advertising expenditures towards influencer marketing programs.

 

Components of Results of Operations

 

Net Revenue

 

Our revenue is generated from the sales of prescription and non-prescription optical glasses, sunglasses, and shipping charges, which are charged to the customer, associated with these purchases. We sell products through our retail store resellers, distributors, and on our own website Lucyd.co and on Amazon.

 

Our flagship product line increased in price with the launch of the version 2.0 models, from $149 to $199 on acetate models, and $179 to $229 on titanium models for non-prescription glasses across all of our online channels. In addition, we introduced a minimum advertised price on the new models of $169 and $199, respectively, to support our retail partners with guaranteed minimum pricing.

 

When adding a prescription lens upgrade to our glasses on the Lucyd.co website, the price can increase from between $40 for a basic clear prescription lens, all the way up to $450 for the latest Transitions^® progressive bifocal lens. Glasses with prescription lenses are only available through our website Lucyd.co, while our sales through Amazon and to our retail partners only include non-prescription glasses.

 

U.S. consumers enjoy free USPS first class postage, with faster delivery options available for extra cost, for sales processed through our website. For Amazon sales, shipping is free for U.S consumers while international customers pay shipping charges. Any costs associated with fees charged by the online platforms (Shopify for Lucyd.co website and Amazon) are not recharged to customers. We charge applicable state sales taxes for both online channels and all other marketplaces on which we sell.

 

Our wholesale pricing for eyewear sold to retail store partners and distributors includes volume discounts, due to the nature of large quantity orders. The pricing includes shipping charges, while excluding any state sales tax charges applicable. Due to the nature of wholesale retail orders, no e-commerce fees are applicable.

 

Cost of Goods Sold

 

Cost of goods sold includes the costs incurred to acquire materials, assemble, and sell our finished products.

 

For retail sales placed on one of our e-commerce channels, these costs include (i) product costs held at the lesser of cost and net realizable value and inclusive of inventory reserves, (ii) freight, import, and inspection costs, (iii) optical laboratory costs for prescription glasses, (iv) merchant fees, (v) fees paid to third-party e-commerce platforms, and (vi) cost of shipping the product to the consumer.

 

For wholesale sales these costs include (i) product costs stated at the lesser of cost and net realizable value and inclusive of inventory reserves, (ii) freight, import, and inspection costs, and (iii) credit card fees.

 

When consumers place their orders directly on our online store, we save approximately 12-15% on marketplace fees compared to when consumers place their orders directly from third-party platforms like Amazon and eBay.

 

We expect our cost of goods sold to fluctuate as a percentage of net revenue primarily due to product mix, customer preferences and resulting demand, customer shipping costs, and management of our inventory and merchandise mix.

 

Over time we expect our total cost of goods sold on a per unit basis to decrease as a result of an increase in scale. Increase in scale is achieved as a result of increase in volumes from both business to consumer and business to business (retail store) orders. We continue to expand our products with line extensions and new models and broaden our presence in retail stores carrying our products.

 

 

Gross Profit and Gross Margin

 

We define gross profit as net revenues less cost of goods sold. Gross margin is gross profit expressed as a percentage of net revenues. Our gross margin may fluctuate in the future based on a number of factors, including the cost at which we can obtain, transport, and assemble our inventory, the rate at our vendor network expands, and how effective we can be at controlling costs, in any given period.

 

We anticipate our cost of goods sold, on a per unit basis, will decrease with scale, and this will likely have a positive impact on our gross margins.

 

Operating Expenses

 

Our operating expenses consist primarily of:

 

●

general & administrative expenses that include primarily consulting and payroll expenses, IT & software, legal, postage and non-customer product shipping, and other administrative expense;

 

●

sales and marketing expenses including cost of online and TV advertising, marketing agency fees, influencers, trade shows, and other initiatives;

 

●

related party management fees for a range of back-office services provided by Tekcapital LLC; and

 

●

research and development expenses related to (i) development of new styles and features of our smart eyewear, (ii) development and improvement of our e-commerce website, and (iii) development of our Lucyd and Vyrb social media apps for wearables.

 

Interest and Other Income, Net

 

Interest and other income, net, consists primarily of interest expense paid on convertible note loan due to the Parent.

 

Provision for Income Taxes

 

Provision for income taxes consists of income taxes related to foreign and domestic federal and state jurisdictions in which we conduct business, adjusted for allowable credits, deductions, and valuation allowance against deferred tax assets.

 

 

Results of Operations

 

Three Months Ended March 31, 2023 and 2022

 

The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022:

 

		Three months ended March 31, 2023				% of Revenues				Three months ended March 31, 2022				% of Revenues				Change between the three months ended March 31, 2023 and 2022				% Change
Revenues, net		$	144,921				100	%		$	236,022				100	%		$	(91,101	)			-39	%
Less: Cost of Goods Sold			(134,630	)			93	%			(161,632	)			68	%			27,002				-17	%
Gross Profit			10,291				7	%			74,390				32	%			(64,099	)			-86	%
Operating Expenses:
General and administrative			(993,772	)			686	%			(606,972	)			257	%			(386,800	)			64	%
Sales and marketing			(259,297	)			179	%			(584,796	)			248	%			325,499				-56	%
Research & development			(151,169	)			104	%			(35,807	)			15	%			(115,362	)			322	%
Related party management fee			(35,000	)			24	%			(35,000	)			15	%			-				0	%
Total Operating Expenses			(1,439,238	)			993	%			(1,262,575	)			535	%			(176,663	)			14	%
Other Income (Expense)			76				0	%			(499	)			0	%			575				-115	%
Interest Expense			(1,939	)			1	%			(17,875	)			8	%			15,936				-89	%
Total Other Expense			(1,863	)			1	%			(18,374	)			8	%			16,511				-90	%
Net Loss		$	(1,430,810	)			987	%		$	(1,206,559	)			511	%		$	(224,251	)			19	%

 

Revenue

 

Our revenues for the three months ended March 31, 2023 were $144,921, representing a decrease of approximately 39% as compared to revenues of $236,022 during the three months ended March 31, 2022. Our revenue is generated entirely from sales of eyewear products, namely smart frames, lenses, and accessories. The decline in revenue was primarily attributable to manufacturing and shipping delays of new product as a result of factory shutdowns related to COVID-19 outbreaks in China.

 

For the three months ended March 31, 2023, approximately 35% of sales were processed on our online store (Lucyd.co), 31% on Amazon, and 34% with reseller partners. This sales channel mix positively impacted our revenue for the period as compared with the prior year period, due to the fact we charge additional $35 to $275 for our prescription lenses available only on Lucyd.co. For the three months ended March 31, 2023, we generated $33,350 of revenue from sales of non-prescription frames and accessories and $16,918 was generated from sales of frames with prescription lenses. All of the $45,045 in sales generated on Amazon.com during the period were for non-prescription frames and accessories as we only offer prescription lenses through our website. Of the $50,268 in online sales generated through Lucyd.co, $16,918 related to frames with prescription lenses and $33,350 of glasses sold were with non-prescription lenses. E-commerce sales are the most material portion of our sales to date.

 

 

For the three months ended March 31, 2022, approximately 24% of sales were processed on our online store (Lucyd.co), 26% on Amazon, and 50% with retail store partners. For the three months ended March 31, 2022, we generated $207,306 of revenue from sales of nonprescription frames and $28,716 was generated from sales of frames with prescription lenses. All of the $61,576 in sales generated on Amazon.com during the period were for non-prescription frames as we only offer prescription lenses through our website. Of the $56,194 in online sales generated through Lucyd.co, $28,814 related to frames with prescription lenses and $27,380 of glasses sold were with non-prescription lenses.

 

Despite the decline in sales, there have recently been several notable advances in our technology products and partnerships which speak to the potential to grow revenues well beyond the current level:

 

●

Key hardware improvements include the development of a new proprietary four-speaker audio temple for the Lucyd Lyte flagship line, the increase in battery life of all of our flagship to 12 hours of playback, which is longer than the vast majority of wireless audio products, and design improvements to the frames overall that were the result of hiring two new expert eyewear designers.

 

●

Key software improvements include the development of a live broadcasting feature on the Company’s proprietary Vyrb mobile app, the ability to import any form of audio content into Vyrb to support the migration of existing audio content creators to the platform, and the introduction of the Company’s Digital Try-on Display into dozens of retail stores, to offer an immersive product experience for in-store shoppers at our partner locations.

 

●

The upcoming launch of the Nautica Powered by Lucyd line later this year, made possible by the exclusive agreement with Authentic Brands Group for the Nautica brand, represents significant revenue potential. We intend to partner with Nautica-branded sales channels and expect to be able to increase our presence in other retail channels via the Nautica brand, a household name in dozens of countries.

 

Over time, we expect that the online portion of our sales will gradually decrease on a percentage basis but remain an important component of our total sales as we onboard more retail stores. We currently have a retail store presence in over 250 stores.

 

Cost of goods sold

 

Our total cost of goods sold decreased to $134,630 for the three months ended March 31, 2023, as compared to $161,632 for the three months ended March 31, 2022. This decrease is largely reflective of the decrease in sales volumes during the current year period as compared with the prior year period, partially offset by higher fees and quality assurance costs in the current year period. Smart eyewear is a highly specialized product that has the combined specifications and component requirements of a wireless Bluetooth headset and optical eyewear in one, meaning it is expensive to manufacture in small quantities of a few thousand at a time. As demand and awareness for smart eyewear continues to grow over time, the Company expects that its per unit cost will decrease as its order volumes increase.

 

Cost of goods sold for the three months ended March 31, 2023 included the cost of frames of $73,798; cost of prescription lenses incurred with our third-party vendor of $22,123; affiliate referral fees, sales commission expense, and e-commerce platform fees of $27,009, and quality assurance costs related to our products sold of $11,700. Out of $134,630 of our total cost of goods sold for the three months ended March 31, 2023, $22,123 related to orders with prescription lenses, while $112,507 pertained to non-prescription orders.

 

Cost of goods sold for the three months ended March 31, 2022 included the cost of frames of $101,633; cost of prescription lenses incurred with our third-party vendor of $34,420; and affiliate referral fees, sales commission expense, e-commerce platform fees of $25,579. Out of $161,632 of our total cost of goods sold for the three months ended March 31, 2022, $44,304 related to orders with prescription lenses, while $117,328 pertained to non-prescription orders.

 

Over time, we expect third-party retail stores to become our primary sales channel as we onboard additional stores. Consequently, we expect sales of prescription lens, offered through our website to decrease, as our third-party retail partners outfit our Lyte frames with more prescriptions. As a result, over time we expect prescription lens costs to gradually decrease as a percentage of our overall cost of goods sold. We anticipate growth in both wholesale and e-commerce channel sales in 2023, and we also expect corresponding growth in total cost of goods sold, primarily from additional product related costs.

 

 

Gross profit

 

Our gross profit was $10,291 for the three months ended March 31, 2023, as compared to $74,390 for the three months ended March 31, 2022. This decrease was primarily due to the aforementioned lower sales volumes driven by manufacturing and shipping delays of new product as a result of factory shutdowns related to COVID-19 outbreaks in China, and was also partially caused by higher fees and quality assurance costs.

 

We expect gross profit for the fiscal year ending December 31, 2023 to improve, primarily due to economies of scale from large, anticipated orders. As we expect retail stores to become our primary sales channel as we on-board new stores, we also expect our overall gross margin to be better than that of the wholesale channel, since no e-commerce platform fees or prescription lens costs apply in wholesale channels.

 

Operating expenses

 

Our operating expenses increased by 14% to $1,439,238 for the three months ended March 31, 2023, as compared to $1,262,575 for the three months ended March 31, 2022. This increase was primarily due to the continued expansion and growth of our business and included, but was not limited to, the following:

 

General and administrative expenses

 

Our general and administrative expenses increased by 64% to $993,772 for the three months ended March 31, 2022, as compared to $606,972 for the three months ended March 31, 2023. This increase was primarily attributable to (i) increased costs associated with being a publicly-traded company, including but not limited to directors’ remuneration, insurance expense, and public and investor relations, which resulted in an increase in expense of approximately $166,000, and (ii) an increase of approximately $134,000 in employee-related costs, resulting from increases in our staffing and new employment agreements entered into with executives in the latter portion of 2022.

 

Sales and marketing expenses

 

Our sales and marketing expenses decreased by 56% to $259,297 for the three months ended March 31, 2023, as compared to $584,796 for the three months ended March 31, 2022. The decrease was primarily due to a restructuring of the Company’s e-commerce business, including a full redevelopment of the main Lucyd.co e- commerce experience, as well as building and enhancing new product listings across Amazon and other third-party marketplaces, which have been completed as of March 31, 2023. While the Company was developing its brand presence across owned and third-party channels, the Company preserved marketing budgets as it focused on conversion optimization of its online listings. The Company intends to scale back up to its former level of advertising spend, but with a lower average cost of sale as a result of the improved web presence and product improvements.

 

We anticipate these costs to increase as we continue to invest in and build our brand, expand the number of e-commerce platforms on which we sell our products, invest in retail store co-op marketing programs to help educate our in-store customers about Lucyd Lytes, and increase our brand’s physical presence and role in the eyewear industry.

 

Research and development costs

 

Our research and development costs increased by 322% to $151,169 for the three months ended March 31, 2023, as compared to $35,807 for the three months ended March 31, 2022. This increase was primarily attributable to an expansion to the Company’s software initiatives to include the Lucyd app, and therefore increased the portion of the work hours spent by the CEO and CTO (as well as a portion of their stock-based compensation expense) on new software development on the Vyrb app, the new Lucyd app, and our glasses, as well as external coding teams we have engaged to write the programming for our software and enhance our software user experiences with code updates. Additionally, the Company hired a new software support agency to assist us in our software initiatives.

 

Related party management fee

 

Our related party management fee was $35,000 for each of the three months ended March 31, 2023 and 2022, based on the terms of the management services agreement between us and an affiliate of our Parent.

 

 

Results of Operations

 

Years Ended December 31, 2022 and 2021

 

		Year ended December 31,
		2022								2021								2022 vs 2021
Revenues, net			659,788				100	%			690,670				100	%			(30,882	)			-4	%
Less: Cost of Goods Sold			(716,077	)			109	%			(542,416	)			79	%			(173,661	)			32	%
Gross Profit			(56,289	)			-9	%			148,254				21	%			(204,543	)			-138	%
Operating expenses:
General & administrative			(2,796,669	)			424	%			(1,386,079	)			201	%			(1,410,590	)			102	%
Sales and marketing			(2,059,012	)			312	%			(1,771,012	)			256	%			(288,000	)			16	%
Research and development			(524,692	)			80	%			(86,261	)			12	%			(438,431	)			508	%
Related party management fee			(140,000	)			21	%			(109,975	)			16	%			(30,025	)			27	%
Total Operating Expenses			(5,520,373	)			837	%			(3,353,327	)			486	%			(2,167,046	)			65	%
Other Income/(Expense):
Interest Expense			(105,171	)			16	%			(39,433	)			-6	%			(65,738	)			0	%
Total Other Income/(Expense)			(105,171	)			16	%			(39,433	)			-6	%			(65,738	)			0	%
Net Loss			(5,681,833	)			861	%			(3,244,506	)			470	%			(2,437,327	)			75	%

 

Revenue

 

Our revenues for the year ended December 31, 2022, were $659,788, representing a decrease of approximately 4% as compared to revenues of $690,670 during the year ended December 31, 2021. Our revenue is generated entirely from sales of eyewear products, namely smart frames, lenses, and accessories. The decline in revenue was primarily attributable to several factors, including unfavorable channel mix as described in the following paragraph, partially offset by higher unit volumes, and favorable price impacts as we increased the MSRP of our flagship product line with the launch of the version 2.0 models in the current year. Additionally, due to the relative age of the version 1.0 models on the market, we deployed significant discounts on those models to assist in inventory turnover. Finally, we experienced an increase in the rate of customer returns due to minor product imperfections that were the result of supplier inaccuracies in manufacturing. These manufacturing imperfections have been wholly addressed with our new version 2.0 product line. In addition, we anticipate that new licensing agreements which we entered into during 2022 will help to increase our sales in 2023 and beyond.

 

For the year ended December 31, 2022, approximately 32% of sales were processed on our online store (Lucyd.co), 38% on Amazon, and 30% with reseller partners. This sales channel mix impacted our revenue for the period, due to the fact we charge an additional $35 to $275 for our prescription lenses available only on Lucyd.co. For the year ended December 31, 2022, we generated $579,214 of revenue from sales of non-prescription frames and accessories and $80,574 was generated from sales of frames with prescription lenses. All of the $252,799 in sales generated on Amazon.com during the period were for non-prescription frames and accessories as we only offer prescription lenses through our website. Of the $208,477 in online sales generated through Lucyd.co, $80,574 related to frames with prescription lenses and $127,873 of glasses sold were with non-prescription lenses. E-commerce sales are the most material portion of our sales to date. There were several notable advances in the Company’s technology products and partnerships in 2022 which speak to the potential to grow revenues well beyond the current level.

 

 

Key hardware improvements include the development of a new proprietary four-speaker audio temple for the Lucyd Lyte flagship line, the increase in battery life of all of our flagship to 12 hours of playback, which is longer than the vast majority of wireless audio products, and design improvements to the frames overall that were the result of hiring two new expert eyewear designers.

 

Key software improvements include the development of a live broadcasting feature on the Company’s proprietary Vyrb mobile app, the ability to import any form of audio content into Vyrb to support the migration of existing audio content creators to the platform, and the introduction of the Company’s Digital Try-on Display into dozens of retail stores, to offer an immersive product experience for in-store shoppers at our partner locations.

 

The Company believes that Nautica Powered by Lucyd line launching in 2023, made possible by the exclusive agreement with Authentic Brands Group for the Nautica brand, represents significant revenue potential in the coming year. The Company intends to partner with Nautica-branded sales channels, and expects to be able to increase our presence in other retail channels via the Nautica brand, a household name in dozens of countries.

 

For the year ended December 31, 2021, approximately 41% of sales were processed on our online store (Lucyd.co), 39% on Amazon and 20% with retail store partners. This sales channel mix impacted our revenue for the period, due to the fact we charge additional $35 to $275 for our prescription lenses available only on Lucyd.co. For the year ended December 31, 2021, we generated $530,885 of revenue from sales of nonprescription frames and $159,815 was generated from sales of frames with prescription lenses. All of the $266,733 in sales generated on Amazon.com during the period were for non-prescription frames as we only offer prescription lenses through our website. Of the $282,364 in online sales generated through Lucyd.co, $159,785 related to frames with prescription lenses and $122,579 of glasses sold were with non-prescription lenses. Lucyd.co sales are the most material portion of our sales to date, aided by higher price compared to retail store pricing as well as additional revenue recorded due to sales of prescription lenses.

 

We expect that the online portion of our sales will gradually decrease on a percentage basis but remain an important component of our total sales as we onboard more retail stores. We pursued growth in retail store segment in the year ended 2021 and during 2022, growing our retail store presence to over 250 stores as of December 31, 2022.

 

Cost of goods sold

 

Our total cost of goods sold increased to $716,077 for the year ended December 31, 2022, as compared to $542,416 for the year ended December 31, 2021. This increase was primarily driven by the combination of (i) a $78,288 write-off of inventory as a result of our physical inventory count procedures performed in December 2022 and (ii) damaged inventory received from one of our suppliers in 2022, which resulted in write-offs of $69,532 of inventory. Subsequently, we have engaged new suppliers for our product sourcing. The Company faced a supply chain challenge in 2022, and received two shipments of glasses that included a few thousand defective units. Once the high rate of defects became apparent, the Company immediately undertook a second 100% inspection of all inventory, and discovered the extent of the issue. The Company then worked to pull any problematic units from standing inventory, and also offered immediate replacement to any customers experiencing issues with any units from these batches. As a result of these problems, the Company severed the relationship with that supplier and conducted a detailed research investigation in China to identify better potential manufacturers of our products, and settled on two new suppliers.

 

Although the Company was reimbursed for a portion of these units from the old supplier, in some cases the units were not discovered to be defective until many months after receipt from the manufacturer and were not able to be compensated.

 

Early customer feedback on the Lyte 2.0 products and feedback from our independent inspection team, indicates that our products from our new suppliers have improved reliability and build quality compared to the original Lyte product, therefore the Company expects significantly less damaged inventory in the future.

 

In regards to the Company’s overall cost of goods, they have remained relatively constant with an increase of only $4-5 per unit compared to the previous supplier - however the improved components and aesthetics allowed the company to adjust the retail MSRP of our products upward by $50, which compensates well for this increase. Our wholesale prices adjusted $10 upward to compensate for this increase.

 

 

A positive development in COGs is a significant decrease in air shipping costs in the latter half of 2022 ($6.50 per unit at the height of the pandemic to $3.50 per unit in Q4 2022), with the company able to ship goods at approximately just over half the price per unit by air compared to 2021 and H1 2022, and with a new sea route available through our local 3PL partner at approximately $1.50/unit.

 

Smart eyewear is a highly specialized product that has the combined specifications and component requirements of a wireless Bluetooth headset and optical eyewear in one, meaning it is expensive to manufacture in small quantities of a few thousand at a time. As demand and awareness for smart eyewear continues to grow, the Company expects that its per unit cost will decrease as its order volumes increase.

 

Key components of cost of goods sold for the year ended December 31, 2022 included, but were not limited to, the cost of frames of $478,020, cost of prescription lenses incurred with our third-party vendor of $104,217, affiliate referral fees, sales commission expense, and e-commerce platform fees of $128,340, and quality assurance costs related to our products sold of $5,500. Out of our total cost of goods sold for the year ended December 31, 2022, $113,024 related to orders with prescription lenses, while $639,294 pertained to non-prescription orders.

 

For the year ended December 31, 2022, approximately 32% of sales were processed on our online store (Lucyd.co), 38% on Amazon, and 30% with reseller partners. This sales channel mix impacted our cost of goods sold, as the cost of prescription lenses attributable to our Lucyd.co sales increased our cost of goods sold through Lucyd.co while not impacting cost of goods sold for sales realized through Amazon or retail store partners. As we continue to grow our business, we expect that our cost of goods sold per unit will decrease as we realize economies of scale.

 

Key components of cost of goods sold for the year ended December 31, 2021 included, but were not limited to, the cost of frames of $303,909, cost of prescription lenses incurred with our third-party vendor of $144,957, affiliate referral fees, sales commission expense, e-commerce platform fees of $89,950, and quality assurance costs related to our products sold of $3,600. In Q4 2022, the company standardized all custom lens profit margins at 35%, except one variant, the basic Single Vision clear prescription lens, which is sold at a 17.5% margin to enable the company to advertise an competitive $40 basic prescription upgrade price.

 

A number of factors in 2022 caused our overall lens lab vendor costs to be higher than revenue from lenses sold:

 

●

Primarily, a large number of prescription units are provided annually as promotional items to influencers, investors, online and traditional media, and other press outlets for the purpose of gaining various forms of brand awareness, investor interest and site traffic for the company.

 

●

The lens lab charges the Company $3,000 annually for the storage of frames in their facility.

 

●

Improperly cut prescriptions, and pairs lost in transit, both infrequent occurrences, are typically replaced for free to enhance customer retention and customer lifetime value.

 

●

When a frame does not properly fit a customer, sometimes a new lens set is provided for free in a different frame that will fit the customer properly.

 

●

Warranty replacements sometimes require a new lens set to be made at no cost to the consumer.

 

●

Our 7-day return policy provides customers comfort when trying our products, but sometimes causes a prescription pair to be returned (custom lenses are refunded in store credit, which may be used to purchase an additional lens set). With active customer care, we are able to keep our return rate low on Lucyd.co (our only prescription channel).

 

●

In conclusion, prescription lenses can often be expensive, running to the hundreds of dollars per set for specialty and bifocal lenses, so a seemingly low number of free prescription pairs can cause a large deficit. However, prescription fitted smart eyewear is a USP of the Company and an incredibly useful tool for attracting positive media coverage. As we continue to scale up the volume of our ecommerce business, we fully expect the standardized lens profit margin to bring more revenue than overall lens costs in the future.

 

 

Out of our total cost of goods sold for the year ended December 31, 2021, $211,620 related to orders with prescription lenses, while $330,796 pertained to non-prescription orders. For the year ended December 31, 2021, approximately 41% of sales were processed on our online store (Lucyd.co), 39% on Amazon and 20% from retail store partners.

 

Over time, we expect third-party retail stores to become our primary sales channel as we onboard additional stores. Consequently, we expect sales of prescription lens, offered through our website to decrease, as our third-party retail partners outfit our Lyte frames with more prescriptions. As a result, over time we expect prescription lens costs to gradually decrease as a percentage of our overall cost of goods sold.

 

We anticipate growth in both wholesale and e-commerce channel sales in 2023, and we also expect corresponding growth in total cost of goods sold, primarily from additional product related costs.

 

Gross (deficit) profit

 

Our gross profit decreased to negative $56,289 for the year ended December 31, 2022, as compared to positive $148,254 for the year ended December 31, 2021. This decrease was primarily driven by the aforementioned inventory write-offs during the current year totaling $147,820.

 

We expect gross profit for the fiscal year ending December 31, 2023, to improve, primarily due to economies of scale from large, anticipated orders. As we expect retail stores to become our primary sales channel as we on board new stores, we also expect our overall gross margin to be better than that of the wholesale channel, since no e-commerce platform fees or prescription lens costs apply in wholesale channels.

 

Operating expenses

 

Our operating expenses increased by 65% to $5,520,373 for the year ended December 31, 2022, as compared to $3,353,327 for the year ended December 31, 2021. This increase was primarily due to the expansion of our business following the launch of Lucyd Lyte in January 2021 and included, but was not limited to, the following:

 

General and administrative expenses

 

Our general and administrative expenses increased by 102% to $2,796,669 for the year ended December 31, 2022, as compared to $1,386,079 for the year ended December 31, 2021. This increase was primarily attributable to (i) an increase of approximately $436,000 in employee-related costs, resulting from increases in our staffing and new employment agreements entered into with executives, (ii) increased costs associated with being a publicly-traded company, including directors’ remuneration, legal and insurance expense, and public and investor relations, which altogether resulted in an increase in expense of approximately $416,000, (iii) bad debt expense in the current year of approximately $116,000, and (iv) an increase in consulting fees of approximately $103,000 as a result of our growth and increased used of consultants.

 

Sales and marketing expenses

 

Our sales and marketing expenses increased by 16% to $2,059,012 for the year ended December 31, 2022, as compared to $1,771,012 for the year ended December 31, 2021. The increase was primarily due to our multi-prong sales and marketing strategy, growing continuously over the past two years after the launch of our main product in January 2021.

 

We anticipate these costs to further increase as we continue to invest in and build our brand, expand the number of e-commerce platforms we sell our products on, invest in retail store co-op marketing programs to help educate our in-store customers about Lucyd Lytes, and increase our brand’s physical presence and role in the eyewear industry.

 

Related party management fee

 

Our related party management fee was $140,000 for the year ended December 31, 2022, as compared with $109,975 for the year ended December 31, 2021. This increase was due to increased scope of assistance received under the agreement, corresponding to continuous scale-up of Company’s operations after launch of its flagship product in the first quarter of 2021. The management fees are related to the management services agreement between us and an affiliate of our Parent.

 

 

Research and development costs

 

Our research and development costs increased by 508% to $524,692 for the year ended December 31, 2022, as compared with $86,261 for the year ended December 31, 2021. The increase was primarily due to stock-based compensation totaling $263,612 in addition to the increased cost of new frame development as the Company continued to expand its product line. Eyewear R&D includes the purchase and testing of new components, the compensation of staff involved primarily in frame design and the creation of new eyewear molds. Software R&D includes the portion of the work hours spent by the CEO and CTO on new software development on the Vyrb app and our glasses, and external coding teams we have engaged to write the programming for our software, and enhance our software user experiences with code updates. Other software costs such as the Apple Developer program are nominal fees only.

 

Liquidity and Capital Resources

 

Cash Flow Data:

 

		Three months ended March 31, 2023				Three months ended March 31, 2022
Net cash flows from operating activities		$	(1,427,072	)		$	(630,869	)
Net cash flows from investing activities			(136,960	)			(82,661	)
Net cash flows from financing activities			1,422,751				675,554
Net Change in Cash		$	(141,281	)		$	(37,976	)

 

In February 2023, investors exercised warrants to purchase an aggregate of 408,600 shares of our common stock, at an adjusted exercise price of $3.75 per share, resulting in cash proceeds to us of $1,532,250.

 

We expect that operating losses could continue in the foreseeable future as we continue to invest in the expansion and development of our business. We believe our existing cash and cash equivalents, proceeds from our August 2022 initial public offering, proceeds received from investors’ exercises of warrants, funds available under our existing credit facility, and cash flows from operating activities will be sufficient to fund our operations for at least the next twelve months.

 

However, our future capital requirements will depend on many factors, including, but not limited to, growth in the number of retail store customers, the needs of our e-commerce business and retail distribution network, expansion of our product and software offerings, and the timing of investments in technology and personnel to support the overall growth of our business. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. There can be no assurances that we will be able to raise additional capital. In the event that additional financing is required from outside sources, we may not be able to negotiate terms acceptable to us or at all. If we are unable to raise additional capital when required, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, financial condition, and cash flows would be adversely affected.

 

Between April 1, 2023 and April 16, 2023, investors exercised warrants to purchase an aggregate of 321,120 shares of our common stock, at an adjusted exercise price of $3.75 per share, resulting in cash proceeds to us of $1,204,200.

 

On April 17, 2023, we entered into a warrant exercise inducement letter agreement with certain accredited investors that were existing holders of warrants to purchase an aggregate of 150,000 shares of our common stock for cash, wherein the investors agreed to exercise all of their existing warrants at an exercise price of $3.75 per share. The gross proceeds we received from this transaction, before deducting estimated expenses and fees, was $562,000. In consideration for the immediate exercise of the existing warrants for cash, the exercising holders received new warrants to purchase up to an aggregate of 300,000 shares of common stock in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

 

 

Off-Balance Sheet Arrangements

 

As of March 31, 2023, we did not have any off-balance sheet arrangements.

 

Critical Accounting Policies and Significant Developments and Estimates

 

Management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods, as well as related disclosures. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities and the amount of revenue and expenses that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

 

We believe that our application of accounting policies, and the estimates inherently required therein, are reasonable. We periodically re-evaluate these accounting policies and estimates and make adjustments when facts and circumstances dictate a change. Historically, we have found our application of accounting policies to be appropriate, and actual results have not differed materially from those determined using necessary estimates.

 

Inventory

 

Our inventory includes purchased eyewear and is stated at the lower of cost or net realizable value, with cost determined on a specific identification method of inventory costing which attaches the actual cost to an identifiable unit of product. Provisions for excess, obsolete, or slow-moving inventory are recorded after periodic evaluation of historical sales, current economic trends, forecasted sales, estimated product life cycles, and estimated inventory levels. No provisions were determined as needed as of March 31, 2023 and December 31, 2022.

 

As of December 31, 2022, we recorded an inventory prepayment in the amount of $197,750, related to a down payment for eyewear purchased from the manufacturer; this product was shipped during the three months ended March 31, 2023, and there was no prepayment balance remaining as of March 31, 2023.

 

Intangible Assets

 

Intangible assets relate to:

 

●

Internally-developed and licensed utility and design patents. We amortize these assets over the estimated useful life of the patents.

 

●

Capitalized software costs incurred due to development of the Vyrb app. We amortize these assets over the estimated useful life of the software application.

 

We review our intangible assets for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

 

 

Income Taxes

 

We are taxed as a C corporation. We comply with Financial Accounting Standards Board (FASB) ASC 740 for accounting for uncertainty in income taxes recognized in a company’s financial statements, which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. FASB ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure. Based on our evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements. We believe that our income tax positions would be sustained on audit and do not anticipate any adjustments that would result in a material change to the Company’s financial position.

 

We have incurred taxable losses since inception but are current in our tax filing obligations. We are not presently subject to any income tax audit in any taxing jurisdiction.

 

Stock-Based Compensation

 

We account for stock-based compensation to employees and directors in accordance with FASB ASC Topic 718, which requires that compensation expense be recognized in the financial statements for stock-based awards based on the grant date fair value. For stock option awards, the Black-Scholes-Merton option pricing model was used to estimate the fair value of share-based awards. The Black-Scholes-Merton option pricing model incorporates various and highly subjective assumptions, including expected term and share price volatility. The expected term of the stock options was estimated based on the simplified method as allowed by Staff Accounting Bulletin 107 (SAB 107).

 

The share price volatility at the grant date is estimated using historical stock prices based upon the expected term of the options granted, using stock prices of comparably profiled public companies. The risk-free interest rate assumption is determined using the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

 

Revenue Recognition

 

Our revenue is generated from the sales of prescription and non-prescription optical glasses, sunglasses, and shipping charges, which are charged to the customer, associated with these purchases. We sell products through our retail store resellers, distributors, and on our own website Lucyd.co and on Amazon.

 

To determine revenue recognition, we perform the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy a performance obligation. At contract inception, we assess the goods or services promised within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. In instances where the collectability of contractual consideration is not probable at the time of sale, the revenue is deferred on our balance sheet as a contract liability, and the associated cost of goods sold is deferred on our balance sheet as a contract asset; subsequently, we recognize such revenue and cost of goods sold as payments are received.

 

All revenue, including sales processed online and through our retail store resellers and distributors, is reported net of sales taxes collected from customers on behalf of taxing authorities, returns, and discounts.

 

For sales generated through our e-commerce channels, we identify the contract with a customer upon online purchase of our eyewear and transaction price at the manufacturer suggested retail price (“MSRP”) for non-prescription, polarized sunglass and blue light blocking glasses across all of our online channels. Our e-commerce revenue is recognized upon meeting of the performance obligation when the eyewear is shipped to end customers. Only U.S. consumers enjoy free USPS first class postage, with faster delivery options available for extra cost, for sales processed through our website and on Amazon. For Amazon sales, shipping is free for U.S consumers while international customers pay shipping charges on top of MSRP. Any costs associated with fees charged by the online platforms (Shopify for Lucyd.co website and Amazon) are not recharged to customers and are recorded as a component of cost of goods sold as incurred. The Company charges applicable state sales taxes in addition to the MSRP for both online channels and all other marketplaces on which the company sells products.

 

 

For sales to our retail store partners, we identify the contract with a customer upon receipt of an order of our eyewear through our Shopify wholesale portal or direct purchase order. Our revenue is recognized upon meeting the performance obligation which is delivery of our eyewear products to the retail store and also recorded net of returns and discounts. Our wholesale pricing for eyewear sold to the retail store partners includes volume discounts, due to the nature of large quantity orders. The pricing includes shipping charges, while excluding any state sales tax charges applicable. Due to the nature of wholesale retail orders, no e-commerce fees are applicable.

 

For sales to distributors, we identify the contract with a customer upon receipt of an order of our eyewear through a direct purchase order and after collectability of substantially all of the contract consideration is probable. Our revenue is recognized upon meeting the performance obligation, which is delivery of our eyewear products to the distributor and is also recorded net of returns and discounts. Our wholesale pricing for eyewear sold to distributors includes volume discounts, due to the nature of large quantity orders. The pricing includes shipping charges, while excluding any state sales tax charges applicable. Due to the nature of wholesale distributor orders, no e-commerce fees are applicable.

 

The Company’s sales to both retail partners and through our e-commerce channels do not contain any variable consideration.

 

We allow our customers to return our products, subject to our refund policy, which allows any customer to return our products for any reason within the first:

 

●

7 days for sales made through our website (Lucyd.co)

 

●

30 days for sales made through Amazon

 

●

30 days for sales to most wholesale retailers and distributors (although certain sales to independent distributors are ineligible for returns)

 

For all of our sales, at the time of sale, we establish a reserve for returns, based on historical experience and expected future returns, which is recorded as a reduction of sales. Additionally, we review all individual returns received in the month following the balance sheet date pertaining to orders processed prior to the balance sheet date in order to determine whether an allowance for sales returns is necessary. The Company recorded an allowance for sales returns of $1,925 and $24,897 as of March 31, 2023 and December 31, 2022, respectively.

 

Shipping and Handling

 

Costs incurred for shipping and handling are included in cost of goods sold at the time the related revenue is recognized. Amounts billed to a customer for shipping and handling are reported as revenues.

 

Earnings/loss per share

 

We present earnings and loss per share data by calculating the quotient of earnings/(loss) divided by the weighted average number of common shares outstanding during the period as required by ASC 260-10-50. For the three months ended March 31, 2023 and 2022, all shares underlying the related party convertible debt and common stock options were excluded from the earnings per share calculation, due to their anti-dilutive effect.

 

 

Business

 

Our History

 

We develop and sell smart eyeglasses and sunglasses, which are designed to allow our customers to remain connected to their digital lives, while also offering prescription eyewear and sun protection. Founded and headquartered in Miami, Florida, we were initially organized as a Florida limited liability company effective August 15, 2019. We were founded by Lucyd Ltd., the inventor and licensor of the technology that our products are based upon which is a portfolio company of Tekcapital Europe Ltd. (“Tekcapital”). Tekcapital is a U.K. based university intellectual property accelerator. Tekcapital builds portfolio companies around new technologies. On March 26, 2020, we converted from a Florida limited liability company into a Florida corporation.

 

Our Product

 

In January 2020, we introduced our first beta product and began market testing.

 

In January 2021, we officially launched our first commercial product, Lucyd Lyte^® (“Lucyd Lyte”). This initial product offering embodied our goal of creating smart eyewear for all day wear that looks like and is priced similarly to designer eyewear, but is also light weight and comfortable, and enables the wearer to remain connected to their digital lives. The product was initially launched with six styles, and in September 2021, an additional six styles were added.

 

We recently launched version 2.0 of our Lucyd Lyte eyewear, and our current product offering consists of 16 version 1.0 models and 15 version 2.0 models, which offers a similar amount of style variety as many traditional eyewear collections. All styles are each available with 70 different lens types, resulting in hundreds of variations of products currently available.

 

Additionally, Lucyd Lyte glasses enable the wearer to listen to music, take and make calls, and use voice assistants to perform many common smartphone tasks hands-free. Some of the many things that can be done with Lucyd Lyte glasses include:

 

	1.	“Send a voice message to (contact)”: this command begins the recording of an audio message to be sent to named contact.
	2.	“Send a text to (contact)”: begins recording of a speech-to-text message to be sent by SMS to named contact.
	3.	“Call (contact)”: speed-dials the named contact.
	4.	“Send $___ to (contact)”: this command allows our user to send money to a contact via Venmo or Apple Pay. Follow the digital assistant’s prompts to confirm.
	5.	“Check my messages”: this command reads out our user’s latest incoming text messages and offers a prompt to reply to each. Close out the digital assistant to end the readout.
	6.	“Check my mailbox”: this command announces the number of unread emails, and reads them out with a prompt to continue after each one. In the prompt after each one, our customers can tell their digital assistant “Reply” and dictate an email response to the previous email.
	7.	“Find (cuisine type) food nearby”: this command reads through a list of nearby restaurants and their ratings, and prompts our user for directions or to call after each one.

 

8.

“Call me an Uber”: this command prompts our user on which type of Uber ride they want, then asks to confirm to send a car to our user’s location.

 

 

9.

“What time is it?”: announces the current time.

 

	10.	“Play (song/album/artist)”: this command begins playing the requested song, album or artist via Apple Music.
	11.	“Get me directions to (location)”: this command begins navigating on phone, with audible directions on glasses.
	12.	“Take a memo”: this command begins recording a speech-to-text memo in Notes. Say “Read my Notes” to play back.

 

Since the launch of Lucyd Lyte, we witnessed interest and demand from customers throughout the United States and have sold thousands of our smart glasses. Within six months of the launch of Lucyd Lyte, several optical stores in the United States and Canada have on- boarded the product and we have had discussions with several other large eyewear chains (by number of locations) regarding onboarding our product. We believe smart eyewear is a product category whose time has come, and we believe we are well positioned to capitalize on and help develop this exciting new sector–where eyewear meets electronics in a user-friendly, mass market format, priced similarly to designer eyewear.

 

In first quarter of 2022 we introduced a virtual try-on kiosk for select retail stores. This device introduces our products to prospective retail customers and enables them to digitally try-on our line of smart glasses in a touch free manner.

 

We anticipate introducing six styles of Nautica smart eyewear, six to twelve additional styles of Lucyd Lyte glasses, and our first Bluetooth safety glasses in 2023. In addition, we anticipate the following upgrades to accessory products in 2023:

 

●

The patent-pending Lucyd charging dock will be upgraded to feature a charging status LED and USB data capability, enabling it to be used as a USB hub for computers in addition to a charging hub.

 

●

The Lucyd virtual try-on kiosk will be upgraded with a store control panel enabling the kiosk owner to change the display into Spanish language mode and control which frames and lens options are shown in the digital experience.

 

In the fourth quarter of 2022, we introduced key features in the Vyrb app, including live broadcasts for up to 100 users in one digital “room”, and the ability to upload external audio content into Vyrb, enabling longstanding content creators to import their existing libraries swiftly into the platform. Also in the fourth quarter of 2022, we completed development of core audio eyewear product improvements, such as upgrading all frames to quadraphonic sound, which have been rolled out across all new eyewear models as of January 2023.

 

Recently in April 2023, we have introduced a major software upgrade for our glasses with the launch of the Lucyd app for iOS/Android. This free application enables the user to converse with the extremely popular ChatGPT AI language model on the glasses, to instantly gain the benefit of one of the world’s most powerful AI assistants in a handsfree ergonomic interface. The app deploys a powerful and unique Siri and Google Voice integration with the Open AI API for ChatGPT, developed internally by the company and now pending patent. This development instantly makes all Lucyd eyewear perhaps the smartest smartglasses available today, and represents a significant marketing opportunity for the company’s core smartglass product, and a potential in-app purchase revenue stream for the company.

 

Our Mission

 

Our mission is to Upgrade Your Eyewear^®. Our smart eyewear is a fusion of headphones with glasses, bringing vision correction and protection together with digital connectivity and clear audio, while also offering a safer solution for listening to music outdoors (as compared to in-ear headphones). The convenience of having a Bluetooth headset and comfortable glasses in one, especially for those who are already accustomed to all-day eyewear use, offers a lifestyle upgrade at a price most consumers can afford.

 

 

In a sense, we view this integration of technology and vison correction/protection as the next evolutionary step in the development of eyewear. Over the entire course of eyewear development and history, many of the innovations have dealt with improving the lenses of the glasses. Notably, eyewear frames have not improved much in the past 400 years, with the exception, in our view, of the utilization of plastic to reduce weight and provide a wider range of designs and finishes, and the introduction of new hinge types. We view the integration of Bluetooth technology into the arms of the glasses as one of the key next steps to Upgrade Your Eyewear^®.

 

Our focus is to enhance one of the world’s most important wearables: eyewear.

 

Additionally, as part of our commitment to a great customer experience, we listen to feedback from our customers, and continuously strive to improve customer satisfaction and experience with our products. Our customers’ extensive feedback pointed to a need and desire for better interaction with social media while on-the-go. We are addressing this need by developing an exciting software application called Vyrb™, which enables Lucyd Lyte users to hear and reply to social media posts, with their voice, hands-free, through their glasses (“Vyrb”). Other Vyrb users will be able hear these posts. Additionally, Vyrb offers Lucyd Lyte users external social media sharing features, which allow posts made on Vyrb to be exported to other platforms such as Facebook, Twitter and Instagram. We launched Vyrb in December 2021 for both iOS and Android, and we believe that Vyrb is one of the first social applications designed specifically with a focus on smart glasses and other voice enabled wearables. We subsequently expanded Vyrb’s capabilities through software upgrades released in the fourth quarter of 2022, and anticipate the commercial launch of Vyrb in the fourth quarter of 2023.

 

We have made strong strides towards our goal of making smart eyewear accessible to the mass market. Several developments towards this end include developing our smart frames in two temple lengths, with a third length planned for 2023; the introduction of smart eyewear specifically for women and youth, which are typically missing from similar offerings; and the introduction of smart eyewear for adults with petite or narrow faces. In addition, we have launched an expansive offering consisting of 16 version 1.0 models and 15 version 2.0 models so far, which offer a similar amount of style variety as many traditional eyewear collections. When paired with the Vyrb application, Lucyd Lyte glasses will provide a new and safer wearable user experience suitable for everyone.

 

Our goal is to become a meaningful player in the smart eyewear market. Innovative Eyewear’s early successes have shown our ability to not only compete, but to lead in this rapidly changing and expanding technological eyewear market, and our goal is to continue spearheading innovation in the field.

 

Giving Back

 

We donate an optical frame for every Lucyd Lyte sold at retail locations.

 

We are also very active in supporting the various communities we serve through donations and support. From the beginning, Innovative Eyewear has supported those in need through its donation of glasses frames to New Eyes (https://new-eyes.org/about-us), a charity dedicated to helping children and adults in need of eyewear. We’ve partnered with New Eyes because they fit the Lucyd brand mission: enhancing the vision of people all over the world, and we believe that it simply is the right thing to do.

 

Additionally, university students, educators, healthcare workers, uniformed service members, and veterans are eligible for an ongoing 18% discount off all frames and lens upgrades on www.lucyd.co.

 

 

Our Competitive Strengths

 

A Unique Solution to a Common Problem. While immensely useful, smartphones can present a safety hazard to motorists, pedestrians and cyclists because smartphones can distract people from the task or activity at hand. In 2021, pedestrian deaths were at a 40-year high according to the Governors Highway Safety Association, and experts believe smartphones were partially to blame. Recent data from the Governors Highway Safety Association indicates that from 2010 to 2020, the number of pedestrian deaths rose by 54%, while all other traffic deaths increased by 13% (Pedestrian Traffic Fatalities by State: 2021 Preliminary Data – (https://www.ghsa.org/resources/Pedestrians22). We believe that the distraction created by smartphones originates in two forms: (1) via headphones or earbuds, where the user is deprived of full audible situational awareness; and, (2) via the visual interface of the phone, which distracts the user completely from their surroundings. Lucyd Lyte open ear audio helps address this problem by having the speakers mounted at the temples (in the arms) of the glasses. There is nothing in the ear canal and, as a result, individuals can better maintain situational awareness, such as hearing the traffic around them, as well as nearby sounds. Many of our competitors have relatively bulky speakers enclosed within the temples, while Lucyd Lyte’s speakers and temples are thin, which allows them to look similar to traditional designer glasses. Furthermore, through the quick and easy touch controls on the Lucyd Lyte, the wearer can perform many tasks that they would normally pull out their phone for, untethering the eyes of the user from their smartphones throughout the day and enabling them to remain more visually vigilant and aware of the traffic around them.

 

Affordable Price Point. Our Lucyd Lyte eyewear provides both optical-quality glasses and a Bluetooth headset together, at roughly the same price as a traditional pair of designer glasses, which is core to the disruptive potential of our product. Our Lucyd Lyte line of smart eyewear enables prescription and sunglass wearers to interact with digital assistants and social media without having to take their eyes off the road and are nearly handsfree, thereby improving the safety and convenience of taking calls, listening to music and audibly accessing digital information on the go. The Manufacturer’s Suggested Retail Price (“MSRP”) for Lucyd Lyte 2.0 eyewear starts at $199, with advanced options and customizations available at higher price points, which are at the discretion of the customer. A basic prescription lens upgrade is offered for $40. By comparison, most of our U.S.-based competitors offer products that are more expensive, starting at approximately $249 or higher, with higher costs to add prescriptions.

 

Quality. All of our frames can be outfitted in-house or by optical resellers with any combination of prescription, sunglass, readers and blue light formats. Our frame fronts are made with what we believe are high quality optical materials to ensure easy lens fitting by any optician.

 

Customizable Product Offering. There are 70 lens types available for Lucyd Lyte, making it the most customizable smart eyewear in the world. Innovative Eyewear has a partnership with a high-quality optical lab in Boston to produce prescription and custom lenses for our frames quickly and affordably. Our contract with a third-party optical lab also allows us to offer direct prescription fulfillment to our customers.

 

Comfort. At just 1.0-1.45 ounces, our eyewear has a feather-light fit, suitable for all day vision correction or sun protection (traditional glasses weigh about 1 ounce). This is especially important while on the go. Our 1.0 ounce titanium aviators are among the lightest smart eyewear ever made.

 

Long Battery Life. At 12 hours of playback per charge, Lucyd Lyte 2.0 glasses outpace most, if not all, of the competition on battery life.

 

Capital Light Business Model. All of our products are sold through multiple e-commerce channels, including on our website (Lucyd.co), BestBuy.com, DicksSportingGoods.com and Amazon.com, and are distributed through optical or other retailers (such as, but not limited to, Metro Optics Eyewear and Marca Eyewear Group, Inc.). We believe this capital light approach is highly scalable and efficient in the deployment of resources. We view “capital light” as being more efficient by obviating the need to build factories and retail stores, while partnering with existing companies in both of these groups.

 

Multiple-Channel Approach. We sell our products both through multiple online channels and multiple categories of brick-and-mortar retail stores. We believe this multi-channel approach provides us with an advantage against our competitors who sell in a narrower selection of channels.

 

Experienced Management Team. We have an experienced board of directors with more than 80 years of combined experience in the eyewear industry, and a management team with substantial experience in software and electronics engineering and operating eyewear and technology companies.

 

 

Our Business Strategy

 

Whenwe organized Innovative Eyewear four years ago, there were, in our view, no attractive smart eyewear that addressed the basicconsumer need for good looking designer glasses that were stylish, comfortable, lightweight and provided the functionality ofhearables, and priced around the same as regular glasses.

 

All of our products are designed in Miami, manufactured in China, and sold through e-commerce, channels, including on our website (Lucyd.co), BestBuy.com, DicksSportingGoods.com and Amazon.com, or sold by over 200 optical and sporting goods retailers. Additionally, we are pursuing online and in-store big box retailers, and in-store and online specialty Based on the existing demand for our products, current distribution and recently consummated supply agreements, we anticipate that our products will be available in a significant number of new third-party retail locations in 2023.

 

We believe that people care about what they wear on their faces, and because we understand that customers have diverse preferences about the shape, size, and design of their eyewear, we aim to continuously introduce new models in an effort to offer a wide variety of designs. We continuously present new models of eyewear to our network of followers to vote on those styles they find most appealing. We view this as community approved design.

 

Sales

 

We have two major sales channels: (1) e-commerce via Lucyd.co and Amazon and, (2) our ongoing development of a network of eyewear, sporting goods and electronics resellers, including but not limited to, BestBuy.com, DicksSportingGoods.com and Brookstone, to offer our frames. Most of our resellers are experienced opticians who provide valuable feedback that informs the development of our product lines, which we would not receive if we were solely direct to consumer. Additionally, we have a robust presence on multiple e-commerce and social media platforms, which facilitates several customer on-ramps for the Lucyd brand, and numerous ad campaign strategies. Building on our early successes of driving traffic to Lucyd.co, the website run by a subsidiary of our majority stockholder, from Facebook and TikTok, we deploy high quality content on multiple platforms to continuously keep customers engaged and drive brand awareness.

 

We have two levels of margins, one for business to consumers (“B2C”), and one for business to business (“B2B”). The majority of our sales have been through e-commerce with current gross margins of approximately 75%; retail sales have gross margins of approximately 40%. Lens upgrades sold on Lucyd.co have a standardized profit margin of approximately 35%. As a company still in an early growth stage, we are investing heavily in our B2C and B2B efforts to capture as much market share as possible, which included in fiscal year 2022 several activities which impacted the gross deficit. Among these promotional activities were single-item B2C discounts, heavy B2B discounts on large bulk orders, a large number of free sample units provided to media, influencers and reviewers, and significant spending on upsells, promo items, and merchandising materials which were in many cases given to B2C and B2B customers for free. Additionally, the logistical costs of the high number of B2C returns in fiscal year 2022 contributed to the deficit. However, with the better establishment of the Lucyd brand expected in 2023, and with the current improvements to the product and increase in MSRP by $50, we expect to neutralize the gross deficit in fiscal year 2023 as our per-unit profitability is increasing. We expect that our retail sales will account for the majority of our sales by the end of 2023.

 

E-commerce Channels

 

1.

Company website: Lucyd.co

 

Lucyd.co is our primary e-commerce point of sale. The site offers the most customization options of any of our sales channels and a full prescription lens lab, offering a total of 70 different lens combinations (21 key lens tints offered in plano, single prescription and progressive bifocal; seven types of reading lenses). Additionally, the Lucyd website ships worldwide and is used to provide a quick and smooth buying experience.

 

 

2.

Amazon

 

Amazon.com/lucyd is our brand shop on Amazon. It drives approximately half of our online sales, but limits the number of variations we can offer on our frames (e.g., prescription lenses are not permitted on Amazon). However, through Amazon, we are still able to offer color lens sunglass variants and blue light blocker pairs, in addition to our charging dock accessory item. We are constantly testing traffic flow to Lucyd.co vs. Amazon to ensure our online ad spend is fully optimized.

 

3.

Walmart.com, BestBuy.com, DicksSportingGoods.com, Brookstone.com, eBay and Touch of Modern

 

In addition to our key online sales channel through Lucyd.co, our products are also sold on Walmart.com, BestBuy.com, DicksSportingGoods.com, Brookstone.com, and eBay.

 

4.

Social Selling

 

Not only do we use social media to drive traffic to our main sales channels, but we also take advantage of intra-social shops as well, and have deployed shopping experiences through Facebook, Instagram and TikTok to gain further brand awareness.

 

We also offer two affiliate platforms via shareasale.com and Shopify for peer-driven sales. The Shareasale program is for professional affiliate and deal promotion companies, and increases revenue on Lucyd.co by offering direct commissions in exchange for converting web traffic. The Shopify affiliate program enables Lucyd brand enthusiasts to get a financial reward for sharing the brand, and operates on similar terms as the Shareasale program where we provide a commission rate in exchange for converting web traffic.

 

Retail Channels

 

1.

Independent Eyewear Stores

 

The core of our B2B business is formed by our relationship with numerous eyewear store retailers across the United States and Canada, which provide Lucyd Lyte frames directly to their optical customers. Many of these retail stores have placed multiple stocking orders since launching our wholesale business in June 2021. To support our resellers, we offer a strong co-op marketing program that includes free store display materials. As part of this strategy, we have launched a digital try-on kiosk for our resellers to help educate their in-store customers about Lucyd eyewear, and increase our brand’s physical presence in the optical industry. We have launched our in-store digital try-on kiosk to key retailers in December 2021 and we have upgraded the kiosk’s capabilities to allow for the customer to try different lens tints, explore an FAQ, download the company’s Vyrb™ social app, and enable in-store reordering from the kiosk.

 

2.

National Eyewear Chains

 

Lucyd eyewear is currently being evaluated by multiple leading eyewear chains in the United States for potential inclusion in their brick-and-mortar stores. After the recent introduction of Ray Ban Stories smart eyewear, many retailers are keen to include one or more smart eyewear products in their stores and on their e-commerce platforms. Based on our current discussion with several major optical chains (by store size), we believe at least one major optical chain or national optical buying group will onboard our product line in 2023.

 

3.

Big Box Retail Stores (Electronics, sporting goods, general merchandise)

 

In addition to mainstream optical channels, we have begun placing our products and are pursuing additional product placements with leading big box stores, either in their eyewear or electronics departments. Specifically, we have begun selling our products on Bestbuy.com and Dickssportinggoods.com.

 

 

4.

License Agreements and Specialty Retail Stores

 

We are leaving no stone unturned in our mission to bring smart eyewear mainstream. We have licensed two leading fashion brands, Nautica and Eddie Bauer, to produce new powered by Lucyd cobranded frames, which will be launched in 2023 on Lucyd sales channels as well as in select Nautica and Eddie Bauer stores. Additionally, we are pursuing other potential sales outlets including inline and specialty retailers.

 

Manufacturing and Supply Chain

 

Our products are designed and specified in the United States and subsequently manufactured in China. The products are designed in-house, 3-D CAD files are then produced with product renderings. We then subject these rendered images for focus group review, to determine which designs we should move to the prototype development stage. Pre-production prototypes are developed by our factories in China to our specifications. Our factories source components for the smart eyewear in China including plastic and titanium for the frames, electronic components, speakers, microphones and batteries. All packaging is designed in Miami and fabricated in China. Once completed, our products are tested in the United States, to assess functionality, fit and finish. Production orders are placed and fabricated in China based on anticipated demand, whereupon they undergo a rigorous thirteen-point third party product inspection process. The inspection is conducted on 100% of our manufactured products. Inspections include testing procedures to help ensure our customers receive only functional, high-quality products. For large bulk orders from clients, we are able to order this inventory on demand, due to the expected lead times in the traditional frame sourcing business.

 

All of our frames are manufactured with prefabricated, ready to wear sunglass or blue light lenses, and are directly shipped to the customer in this state if the customer declines purchasing custom lens upgrades. If a customer orders with prescription or specialty lenses, then the smart eyewear frames are sent to an optical contractor laboratory in Boston, Massachusetts, to have the lenses cut, ground and mounted in the frames, whereupon they are directly shipped to customers.

 

Our in-store kiosks are comprised of a fixture, a tablet, and proprietary software, which enable the prospective customer to virtually try on our smart glasses. The fixtures, which sport our Company name, are manufactured by a U.S.-based third-party company, and are designed to serve as a holding mechanism for the tablet. We purchase each tablet through Amazon.com, which is then fitted to the kiosk fixture. The Company currently utilizes Samsung’s tablets for its in-store kiosks. Once each tablet is fitted to its kiosk fixture, the tablet is loaded with software which ultimately presents the Company’s try-on application. This software-based chain of processes relies on the tablet’s built-in camera and enables the prospective buyer of our smart eyewear to virtually try-on the glasses, which are superimposed in different styles onto the customer’s face using the front-facing camera. The tablet is fitted to the kiosk and loaded with our software in our Miami facility, from where they are shipped to a third-party warehouse in Miami for distribution to retail stores.

 

Marketing

 

We employ a 360-degree marketing strategy that encompasses both brand and user generated content syndication across earned, owned and paid platforms (channels where the company pays a fee to have its product advertised). Long form and video content generation are a key focus points for the brand, they allow us to better leverage both emerging and critical smart eyewear narratives through persistent search engine optimization (SEO); increasing our organic brand awareness across the board, in addition to strategic loyalty, influencer and affiliate marketing campaigns.

 

Our online marketing strategy is primarily driven by pay-per-click advertisements on mainstream search engines, social media apps, and Amazon and other marketplaces. In addition, we support our primary efforts with influencer created and promoted “UGC” (user-generated content), email automations and newsletters, and website push notifications. We have also deployed nationwide broadcast cable TV campaigns and plan to use this channel in the future.

 

We believe we are trendsetters in creating relevant, omni-channel touchpoints that derive meaningful experiences and products designed for our customers.

 

 

Our wholesale marketing strategy is primarily focused on traditional sales email and call outreach, national and regional optical trade shows, and optical and athletic trade advertisements.

 

From a brand perspective, strategically offering value-added optical smart eyewear coupled with expansive end-user customization our social audio app initiatives can potentially rapidly expand brand awareness and revenue. At Innovative Eyewear, we strive to lead and own critical narratives within the Bluetooth and smart eyewear space.

 

We seek to create memorable experiences and products that resonate with our customers, coupled with premium content and campaigns designed to expand our brand presence and market share. We also attend major regional eyewear and sporting goods trade shows to build awareness among our potential retail partners.

 

Our influencers

 

To accelerate brand awareness and product sales, we are embarking on an influencer strategy to engage leading figures in sports and the arts, who like and enjoy wearing Lucyd Lyte^®. To date we have onboarded Chris Clark, a pro golfer, Monique Billings, a WNBA basketball player, and Hadar Adora, an up-and-coming musical artist. We plan to add additional influencers to enhance awareness and sell-through for a number of key demographics.

 

Influencers are a key part of our marketing strategy, as they help our products relate to large, variable audiences. Lucyd Lyte is a perfect fit for the fitness tech and audio product spaces, so athletes and musicians are a natural fit for our brand and the active lifestyles that Lucyd products promote. We plan to add A-list musical talent to the brand in the near future, as well as a host of audio content creators to support the Vyrb experience.

 

Our Market Opportunity

 

According to Statista, the total addressable market for eyewear in the U.S. is projected to be $33.8 billion in 2023. The market for digital assistants like Siri, Google Voice, Bixby and Alexa has grown rapidly worldwide, and is projected at $4.5 billion in revenue in 2023. The worldwide hearables market was estimated at $69.0 billion in 2022. We view the popularity of hearables as an important catalyst for the smart eyewear market.

 

The common denominator among markets for the hearables and digital assistant is that they facilitate real-time access to digital data, whether it is through music, calls, navigational directions, or information, among other uses. The combination of hearables and digital assistants provides a transparent, ergonomic interface between the users and their digital lives. At Innovative Eyewear, we are dedicated to a touch-free interface and untethering our customers eyes from their smartphone screens, through our smart eyewear product.

 

The synergistic fusion of these three markets enables, in our view, an opportunity to create a completely new experience of connected eyewear, which smoothly delivers the functionality of both optical glasses and headphones, eliminating the need for either on its own. Nevertheless, several orthodoxies of the eyewear industry still hold, namely: if you want to sell a lot of eyewear, we believe it should be attractive, stylish, comfortable (e.g., lightweight, which we believe to be approximately 1oz) and cost roughly the same as traditional eyewear. This is what we have sought to achieve, and in our view have accomplished with the introduction of Lucyd Lyte eyewear.

 

Intellectual Property

 

We license from Lucyd Ltd., a subsidiary of our majority stockholder, an intellectual property portfolio designed to protect our unique eyewear designs and certain technological features in current and anticipated future products. More recently, the company has begun filing patents under its own name.

 

We have licensed and filed 63 patents to date, covering many of our current product designs and certain advanced features such as Vyrb, replaceable front frames, and multi-channel Bluetooth connectivity. The Company will seek to file new IP to protect new styles and features of its smart eyewear as they are introduced.

 

 

Our current U.S. and foreign patent portfolio is as listed below:

 

Application/Patent Number

Title

Country

Filing Date

Assignors/Assignee

Reel/Frame No.

Status

Grant Date

Anticipated Expiration Date

10,908,419

Smartglasses and Methods and Systems for Using Artificial Intelligence to Control Mobile Devices Used for Displaying and Presenting Tasks and Applications and Enhancing Presentation and Display of Augmented Reality Information

US

June 28, 2018

Clifford M. Gross, Harrison Gross / Lucyd Ltd.

046324/0147

Issued

February 2, 2021

October 5, 2038   (Patent Term Adjustment – 99 days)

D899,493

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 20, 2020

October 20, 2035

D900,203

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 27, 2020

October 27, 2035

D899,494

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 20, 2020

October 20, 2035

D899,495

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 20, 2020

October 20, 2035

D899,496

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 20, 2020

October 20, 2035

D900,204

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 27, 2020

October 27, 2035

D900,205

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 27, 2020

October 27, 2035

D900,920

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

November 3, 2020

November 3, 2035

D900,206

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 27, 2020

October 27, 2035

D899,497

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 20, 2020

October 20, 2035

D899,498

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 20, 2020

October 20, 2035

D899,499

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 20, 2020

October 20, 2035

D899,500

Smart Glasses

US

March 22, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

048856/0079

Issued

October 20, 2020

October 20, 2035

D954,135

Round Smartglasses Having Flat Connector Hinges

US

December 12, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

051469/0948

Issued

June 7, 2022

June 7, 2037

D958,234

Round Smartglasses Having Pivot Connector Hinges

US

December 12, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

051469/0948

Issued

July 19, 2022

July 19, 2037

D955,467

Sport Smartglasses Having Flat Connector Hinges

US

December 12, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

051469/0948

Issued

June 21, 2022

June 21, 2037

D954,136

Smartglasses Having Pivot Connector Hinges

US

December 12, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

051469/0948

Issued

June 7, 2022

June 7, 2037

62/941,466

Wireless Smartglasses with Quick Connect Front Frames

US

November 27, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

051165/0662

Non-Provisional Application filed on November 25, 2020; U.S. App. No. 17/104,849

n/a

November 27, 2020

 

 

Application/Patent Number

Title

Country

Filing Date

Assignors/Assignee

Reel/Frame No.

Status

Grant Date

Anticipated Expiration Date

D954,137

Flat Connector Hinges for Smartglasses Temples

US

December 19, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

051469/0948

Issued

June 7, 2022

June 7, 2037

D974,456

Pivot Hinges and Smartglasses Temples

US

December 19, 2019

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

051469/0948

Issued

n/a

n/a

11,282,523

Voice Assistant Management

US

March 25, 2020

Harrison Gross / Lucyd Ltd

052245/0348

Issued

March 22, 2022

June 27, 2040

29/743,256

Wayfarer Smartglasses

US

July 20, 2020

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

057651/0844

Pending

n/a

n/a

D951,334

Round Smartglasses

US

July 20, 2020

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

057651/0844

Issued

May 10, 2022

May 10, 2037

17/104,849

Wireless Smartglasses with Quick Connect Front Frames

US

November 25, 2020

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

057652/0218

Pending

n/a

n/a

29/806,200

Smartglasses

US

September 1, 2021

Clifford Gross, Harrison Gross / Lucyd Ltd.

057652/0350

Pending

n/a

n/a

29/806,204

Smartglasses

US

September 1, 2021

Clifford Gross, Harrison Gross / Lucyd Ltd.

057652/0430

Pending

n/a

n/a

29/806,207

Smartglasses

US

September 1, 2021

Clifford Gross, Harrison Gross / Lucyd Ltd.

057652/0674

Pending

n/a

n/a

29/806,209

Smartglasses

US

September 1, 2021

Clifford Gross, Harrison Gross / Lucyd Ltd.

057652/0794

Pending

n/a

n/a

207516

Smartglasses

Canada

October 29, 2021

Clifford Gross, Harrison Gross / Lucyd Ltd.

n/a

Pending

n/a

n/a

207517

Smartglasses

Canada

October 29, 2021

Clifford Gross, Harrison Gross / Lucyd Ltd.

n/a

Pending

n/a

n/a

207518

Smartglasses

Canada

October 29, 2021

Clifford Gross, Harrison Gross / Lucyd Ltd.

n/a

Pending

n/a

n/a

207519

Smartglasses

Canada

October 29, 2021

Clifford Gross, Harrison Gross / Lucyd Ltd.

n/a

Pending

n/a

n/a

29/814,016

Safety Smartglasses

US

November 2, 2021

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

05872/0894

Pending

n/a

n/a

29/814,017

Safety Shields

US

November 2, 2021

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

058720/0955

Pending

n/a

n/a

63/274,920

Safety Glasses

US

November 2, 2021

Clifford Gross / Lucyd Ltd.

058720/0961

Non-Provisional Application filed on October 21, 2022; U.S. App. No. 18/048,715

n/a

n/a

29/815,040

Charging Cradle

US

November 10, 2021

Clifford Gross / Innovative Eyewear, Inc.

058721/0019

Pending

n/a

n/a

207956

Safety Smartglasses

Canada

November 17, 2021

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

n/a

Pending

n/a

n/a

207957

Safety Shields

Canada

November 17, 2021

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

n/a

Pending

n/a

n/a

2021307950576

Safety Smartglasses

China

December 2, 2021

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

n/a

Pending

n/a

n/a

ZL 2021307955902

Safety Shields

China

December 2, 2021

Clifford M. Gross, David Cohen, Harrison Gross / Lucyd Ltd.

n/a

Issued

May 3, 2022

December 1, 2036

63/297,056

Charging Cradle for Smartglasses

US

January 6, 2022

Clifford Gross / Innovative Eyewear, Inc.

058721/0083

Non-Provisional Application filed on December 29, 2022; U.S. App. No. 18/147,002

n/a

n/a

 

 

Application/Patent Number

Title

Country

Filing Date

Assignors/Assignee

Reel/Frame No.

Status

Grant Date

Anticipated Expiration Date

212589

Charging Cradle

Canada

May 9, 2022

Clifford Gross / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

ZL 2022302715131

Charging Cradle

China

May 10, 2022

Clifford Gross / Innovative Eyewear, Inc.

n/a

Issued

October 21, 2022

May 9, 2037

18/048,715

Safety Glasses

US

October 21, 2022

Clifford Gross / Lucyd Ltd.

n/a

Pending

n/a

n/a

3180624

Safety Glasses

Canada

November 1, 2022

Clifford Gross / Lucyd Ltd.

n/a

Pending

n/a

n/a

202211367067X

Safety Glasses

China

November 2, 2022

Clifford Gross / Lucyd Ltd.

n/a

Pending

n/a

n/a

18/147,002

Charging Cradle for Smartglasses

US

December 27, 2022

Clifford Gross / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,951

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,952

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,957

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,958

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,959

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,960

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,961

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,965

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,966

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,968

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,970

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,972

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,974

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

29/870,975

Smartglasses

US

February 9, 2023

Harrison Gross, David Cohen, Breno Fuzette, Matthew Gale / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

18/189,547

System, Apparatus, and Method For Using a Chatbot

US

March 24, 2023

Harrison Gross, Clifford Gross / Innovative Eyewear, Inc.

n/a

Pending

n/a

n/a

 

 

D954,135		Round Smartglasses Having Flat Connector Hinges		US		December 12, 2019		Issued		June 7, 2022
D958,234		Round Smartglasses Having Pivot Connector Hinges		US		December 12, 2019		Issued		July 19, 2022
D955,467		Sport Smartglasses Having Flat Connector Hinges		US		December 12, 2019		Issued		June 21, 2022
D954,136		Smartglasses Having Pivot Connector Hinges		US		December 12, 2019		Issued		June 7, 2022
62/941,466		Wireless Smartglasses with Quick Connect Front Frames		US		November 27, 2019		Non-Provisional Application filed on November 25, 2020; U.S. App. No. 17/104,849		n/a
D954,137		Flat Connector Hinges for Smartglasses Temples		US		December 19, 2019		Issued		June 7, 2022
D974,456		Pivot Hinges and Smartglasses Temples		US		December 19, 2019		Issued		n/a
11,282,523		Voice Assistant Management		US		March 25, 2020		Issued		March 22, 2022
29/743,256		Wayfarer Smartglasses		US		July 20, 2020		Pending		n/a
D951,334		Round Smartglasses		US		July 20, 2020		Issued		May 10, 2022
17/104,849		Wireless Smartglasses with Quick Connect Front Frames		US		November 25, 2020		Pending		n/a
29/806,200		Smartglasses		US		September 1, 2021		Pending		n/a
29/806,204		Smartglasses		US		September 1, 2021		Pending		n/a
29/806,207		Smartglasses		US		September 1, 2021		Pending		n/a
29/806,209		Smartglasses		US		September 1, 2021		Pending		n/a
207516		Smartglasses		Canada		October 29, 2021		Pending		n/a
207517		Smartglasses		Canada		October 29, 2021		Pending		n/a
207518		Smartglasses		Canada		October 29, 2021		Pending		n/a
207519		Smartglasses		Canada		October 29, 2021		Pending		n/a
29/814,016		Safety Smartglasses		US		November 2, 2021		Pending		n/a
29/814,017		Safety Shields		US		November 2, 2021		Pending		n/a
63/274,920		Safety Glasses		US		November 2, 2021		Non-Provisional Application filed on October 21, 2022; U.S. App. No. 18/048,715		n/a
29/815,040		Charging Cradle		US		November 10, 2021		Pending		n/a
207956		Safety Smartglasses		Canada		November 17, 2021		Pending		n/a
207957		Safety Shields		Canada		November 17, 2021		Pending		n/a
2021307950576		Safety Smartglasses		China		December 2, 2021		Pending		n/a
ZL 2021307955902		Safety Shields		China		December 2, 2021		Issued		May 3, 2022
63/297,056		Charging Cradle for Smartglasses		US		January 6, 2022		Non-Provisional Application filed on December 29, 2022; U.S. App. No. 18/147,002		n/a
212589		Charging Cradle		Canada		May 9, 2022		Pending		n/a
ZL 2022302715131		Charging Cradle		China		May 10, 2022		Issued		October 21, 2022
18/048,715		Safety Glasses		US		October 21, 2022		Pending		n/a
3180624		Safety Glasses		Canada		November 1, 2022		Pending		n/a
202211367067X		Safety Glasses		China		November 2, 2022		Pending		n/a
18/147,002		Charging Cradle for Smartglasses		US		December 27, 2022		Pending		n/a

 

 

Additionally, we have acquired the exclusive rights to 11 registered trademarks and applications as follows:

 

Trademark		Trademark Number		Status		Jurisdiction
LUCYD		UK00003258030		Registered		UK
Lucyd Lens		UK00003258093		Registered		UK
Lucyd Loud		UK00003400531		Registered		UK
Upgrade your eyewear		UK00003400579		Registered		UK
GaaS		UK00003451728		Registered		UK
Vyrb		UK00003477240		Registered		UK
Lyte		UK00003526151		Registered		UK
Upgrade your eyewear		Application No. 90/407,646		Application		US
LUCYD		Application No. 90/407,723		Application		US
Lyte		Application No. 90/381051		Application		US
Vyrb		Application No. 90/820713		Application		US

 

Material Agreements

 

License Agreement between Innovative Eyewear, Inc. and Lucyd Ltd.

 

On April 1, 2020, we entered into an exclusive, worldwide license agreement with Lucyd Ltd. for all fields of use of the Lucyd^® brand, and the associated intellectual property and assets (the “License Agreement”). We were founded by Lucyd Ltd., the inventor and licensor of the technology that our products are based upon, which is a portfolio company of Tekcapital, our majority stockholder. The License Agreement is a royalty-free, fully paid up, perpetual license, for the exclusive use of the following assets:

 

	1.	All Lucyd intellectual property, including, all patents, patent applications and any continuations of such.
	2.	All Lucyd trademarks.
	3.	All Lucyd collateral material, artwork, subscriber lists, eyeglass model and frame shots and renders, as well as 3D models.
	4.	All Lucyd logos such as, but not limited to: Lucyd® word mark, Lucyd Hexagon, Upgrade Your Eyewear® slogan and the Vyrb® trademark.
	5.	All Lucyd company developed software and any new software developed by Innovative Eyewear, utilizing the Lucyd software, will be owned by Innovative Eyewear.
	6.	Lucyd Store portals through Shopify, Amazon and Walmart.
	7.	Relevant websites domain names including Lucyd.co, Lucyd.net, Lucyd.eu.
	8.	All supply and endorsement agreements.
	9.	All current inventory as of the execution date of license.

 

	10.	All social media accounts under the Lucyd name, including, but not limited to: Twitter, Facebook and Instagram.
	11.	All advertising material and trade show displays, brochures and related materials.

 

 

Under the terms of the License Agreement, we have the exclusive right to effectuate sublicenses, either exclusively or non-exclusively, to any or all of our licensed intellectual property, at its sole discretion. Upon execution of the License Agreement, we paid Lucyd Ltd. £1 for the life of the licensed assets, and the License Agreement shall continue in perpetuity, unless terminated according to the terms of the agreement. Additionally, we issued 3,750,000 shares of our common stock to Lucyd Ltd. as compensation for entering into the License Agreement and for the contribution of certain other assets. Lucyd Ltd. may terminate the license with immediate effect by providing written notice to us if, among other things: we commit a material breach, as such is defined by the terms of the agreement; or, if we suspend, or threaten to suspend, payment of our debts or are unable to pay our debts.

 

The License Agreement requires us to indemnify Lucyd against all liabilities, costs, expenses, damages, and losses (including but not limited to any direct, indirect or consequential losses, loss of profit, loss of reputation and all interest, penalties, and legal costs (calculated on a full indemnity basis) and all other reasonable professional costs and expenses) suffered or incurred by Lucyd Ltd. arising out of or in connection with actual or alleged infringement of third party intellectual property rights; our breach or non-performance of or the enforcement of License Agreement. We have the right to sublicense any of our rights under the License Agreement, provided that any sublicense also shall enter into a supplemental agreement satisfactory to Lucyd Ltd.

 

On October 5, 2021, the parties to the License Agreement executed an Addendum, to the exclusive license agreement, which clarified that Innovative Eyewear shall commercialize, continue with any on-going intellectual property prosecutions and pay all maintenance or other patent fees (the “Addendum”). For all new intellectual property, Innovative Eyewear will own and control it and be responsible for all prosecution and maintenance costs. The Addendum also confirms that Innovative Eyewear issued Lucyd Ltd. 3,750,000 shares of its common stock as consideration for the license.

 

Sales Representation Agreement

 

On March 4, 2021, we entered into a commission-only, sale representation agreement with D. Landstrom Associates, Inc. for prospecting a wholesale relationship with Walmart, Target and Best Buy stores in the United States (the “Representation Agreement”). The Representation Agreement provides for D. Landstrom to act as our commission based, manufacturer’s representative, with the exclusive right to solicit offers on behalf of us to purchase our products in the United States, for the named big box stores. The term of the Representation Agreement is five years. Contract may be terminated for “good cause” with 90 days’ notice by either party. Upon termination, commissions of orders procured will extend 180 days beyond termination date. Thus far, the representation has resulted in a successful launch of the Company’s products on BestBuy.com.

 

Distribution Agreement

 

On June 30, 2021, we entered into a distribution agreement with 8 Points Inc., a subsidiary of Marca Eyewear Group Inc., for exclusive distribution of Lucyd Lyte products in Canada (the “Distribution Agreement”). The Distribution Agreement provides that 8 Points Inc. will have exclusive purchase and distribution rights and obligations in Canada. The term of the Distribution Agreement is 3.5 years and either party may terminate by providing 180 days’ notice to the other party. The distributor will perform services, which shall include, but shall not be limited to the following):

 

1.

Sales of our products into retail distribution by servicing potential purchasers and by generating new business within the Territory (as defined in the Distribution Agreement).

 

	2.	Handling of all account inquiries on sales made pursuant to this Distribution Agreement.
	3.	Innovative Eyewear will receive all Canadian returns on a timely basis. Currently, distributor will organize customer returns such that all returns will be shipped in bulk to Company’s distribution center in Miami, Florida.

 

 

4.

Company will provide marketing activities to support the sales of all the collections sold by the Distributor in the territory.

 

	5.	Distributor will provide logistic service to distribute the product in the territory covering all provinces and provide internal customer service and warehousing and shipping, as well as after purchase care to customer.
	6.	Distributor will provide a minimum purchase of $4.6 million worth of Lucyd Lyte products over 30 months to maintain exclusivity for sales in Canada.
	7.	Monthly minimum committed purchases increase incrementally over the term of the Distribution Agreement. In the event that 8 Points Inc. does not meet the minimum monthly purchase requirements then we may convert 8 Points Inc. exclusive contract to a non-exclusive contract or terminate the Distribution Agreement.

 

The distributor has not met the requirements to maintain exclusivity; as such, we have converted the Distribution Agreement to a non-exclusive contract in accordance with the terms of the agreement as outlined above.

 

Other License Agreements

 

In 2022, we entered into various multi-year global license agreements which grant us the right to utilize certain proprietary brands for our smart eyewear products. These agreements require us to pay royalties based on a percentage of net retail and wholesale sales, with combined future minimum noncancellable payments due under these license agreements of approximately $2.1 million over the next 5 calendar years.

 

The Next Step

 

Vyrb™ Social Audio App

 

We believe eyewear should enable customers to freely interact with social media. While digital assistants, once enabled, can provide the basis for this interaction, we believe that the ability to receive and send social media posts with an individual’s voice may greatly enhance ease of use of these platforms on the go. To facilitate this, we have been developing Vyrb, our full stack social media application that enables the user to receive and send posts through Lucyd Lyte smart glasses with an individual’s voice. The application launched out of beta in December 2021, and the further development of the Vyrb app is continuing on pace, with two major features launched in December 2022: the ability to host live audio streams with up to 100 visitors and six live speakers at a time; and the ability to import external audio files into Vyrb, which allows longstanding podcasters and other content creators to add their content libraries into Vyrb. After the introduction of several more features and key user experience improvements, we anticipate a commercial launch of Vyrb in the fourth quarter of 2023. At or soon after this time, advertising and monetization features will be introduced into the app to make it a new revenue stream for our business.

 

We believe that Vyrb will enhance the utility of current and future Lucyd Lyte glasses by enabling users to be untethered from their smartphones, yet still be able to hear and make social media posts. A goal of our products is to free our customers from other technologies. As such, we are designing Vyrb with a transparent, voice-centric interface in mind, so that as soon as our customers can say “Ok Google,” they are connected to a world of engaging audio content and have the ability to create audio posts and messages. We believe social interaction via smart eyewear will be instrumental in bringing new, youthful customers to our company.

 

A number of companies recently have started to launch voice mediated social media applications, such as Clubhouse, Discord, Audlist, Listen and Riffr. We are designing Vyrb to host audiobooks, podcasts and entire music albums on the platform. With Vyrb, Lucyd Lyte customers are able to hear their social media feeds, post messages, hold gatherings and musical performances (by inviting other Vyrb users to connect with each other at a specific date and time), and enjoy social media with the authenticity of their own voice, all through their eyewear and without taking their phone out of their pocket.

 

 

The Product and Market for Vyrb

 

Vyrb is being designed as a full social media experience to enhance voice-based communications on wearables and mobile devices. The sophistication of Vyrb’s interface enables a large array of in-app purchases and subscriptions, as well as easy connectivity with the Lucyd Lyte line of smart eyewear. In addition to an ad-driven revenue model that is typical of social media applications, the robust and highly variable selection of planned in-app purchases provide important improvements and fine-tuned customizations to help personalize the user experience. We plan to roll out these and other exciting features of Vyrb over the course of several software updates.

 

The Vyrb app is contemplated to feature an in-app item shop with a number of fun and useful upgrades, such as:

 

●

Loot Boxes — Random packs of multiple upgrade items, a best-selling in-app purchase format frequently deployed in online video games.

 

●

Skins — Items that alter the appearance of the app to help personalize it to the user’s preferences, such as Dark Mode.

 

●

Accents — Items that change the accent used by the app’s text-to-speech engine, which is employed frequently to vocalize textual content.

 

●

Metal Mics — Items that lengthen the maximum allowable verbal post length and image/video sizes per post for users.

 

●

Post Embellishments — Items that can be used to animate posts in the feed to make them more prominent.

 

●

Sound FX Packs — Items that increase the number of audio emojis (Sound FX) available to the user, livening up their posts.

 

●

Ad Tokens — Items that can be spent to expand the reach of a feed post to a larger audience.

 

●

Vyrb Gold — A premium, monthly subscription to the app that blocks all ads and brings additional benefits like a more prominent username.

 

●

Vyrb Gems — In-app currency that can be spent to tip a user’s favorite content creators, to buy premium paywalled content and to buy certain other in-app purchases. Gems can also be traded to other users for their items on the Vyrb Marketplace module. Users will also be rewarded Gems for their engagement with ads on the platform, creating a positive feedback loop that rewards app engagement with premium content and experiences.

 

●

Command Tokens — Items that can be spent to create new custom voice assistant commands (based on Vyrb’s Voice Command Creation Interface).

 

●

Mega-Tag Tokens — Items that can expand the number of mega-tags available to the user (mega-tags are a unique Vyrb feature, they are automatically applied hashtags that make a user’s posts more discoverable to others).

 

Users spend approximately 145 minutes per day on social media applications and regularly click on advertisements they view through their applications. We believe Vyrb is strategically positioned to become a prime advertisement space, allowing both visual and audible advertisements to be purchased. Vyrb ads will be shown in a user’s regular newsfeed, which we believe will create an opportunity and need for a subscription in-app purchase (Vyrb Gold) for a premium, ad-free browsing experience. For ease of use, Vyrb ads can be created by any user through the application in just moments: users will be able to purchase “Ad Token” items from the in-app store, and then use these tokens to turn standard posts into wide-reaching ads. A rapid-response reporting system will be developed and monitored to remove objectionable or illegal content from the platform. With its focus on high quality audio, we are designing Vyrb to lift up professional and creative audio content developers by helping them reach new audiences. To ensure a positive user experience, we are developing a system in Vyrb which will automatically promote positively reviewed content, and automatically remove content that has been reported in a high ratio compared to the number of viewers, providing the basis for user product discovery as well as a failsafe against any mistake in our manual and algorithmic moderation of the application’s hosted content.

 

 

Vyrb users will be able to purchase and support content from indie and professional creators via an in-app currency (referred to as “gems” in this document, a virtual point the user typically accumulates by viewing ad content or by purchasing them). Creators will receive gems from typical users as tips during live broadcasts, and in exchange for access to premium posts. The creators will then be able to cash out these gems at an exchange rate that provides profit to Vyrb. For example, users purchase the gems, its in-app loyalty token at a rate of $1 each, but creators only receive $0.75 for each gem they cash out. A 25% effective platform fee would put the content transaction fees of Vyrb at a lower rate than most digital content marketplaces. In the case of typical livestreaming applications, a functionality Vyrb supports, they are often exorbitant, taking as much as 50% in effective fees on in-app currency transactions.

 

To acquire the gems, users must buy them in the Vyrb Shop or gain them by engaging with sufficient ad content (e.g., using the application for an hour, or an amount of time that effectively pays for the gem). While Vyrb allows users the flexibility of choice of either buying or earning these gems, we believe that there is a huge revenue stream potential for us through a strategic implementation of the Vyrb Shop and peer-to-peer content transactions.

 

Also, we plan for users to be able to charge a fixed price to be able to access particular audio posts. For example, this feature could be used by a podcaster to sell their premium episodes, or by a recording artist to sell their music albums. In tandem with this feature, audio posts will be divisible into tracks to support long form content such as albums and audiobooks. Vyrb will take a flat percentage fee on all sales of premium content within the application by allowing creators to cash out gems they receive for selling their content. We believe the major benefit of this system is that it will provide audio content creators a new platform for rapidly creating, listing and selling their content, and help create an environment full of rich, unique and interactive audio experiences such as live “radio shows,” indie content and virtual concerts for typical Vyrb users.

 

We believe that Vyrb will effectively leverage multiple successful gamification models from the world of social media to provide a flexible and highly interactive user experience that can potentially draw high-value content creators. A fundamental aspiration of Vyrb is to provide a new platform and source of revenue for high quality audio content creators in particular; to that end, we designed Vyrb with a goal of providing a rapid, user-friendly platform for creators and consumers to share, sell and enjoy the best audio the web has to offer. We believe that through Vyrb, we can make the interaction between our users and our product a fun and rewarding experience, which can also be monetized by the company and content creators alike. By putting audio front and center, we hope to provide a new meeting ground for audio content creators and those who enjoy lots of music, podcasts and talk shows. We hope to provide a mutually beneficial relationship, where Vyrb takes a reasonable fee on the transacting of these parties in exchange for bringing them together.

 

Competition

 

The smart eyewear industry in which we operate is competitive and subject to changes in practice. While we believe that our products are hybrid of eyeglasses and audio technology, which gives us a unique product that provides us with competitive advantages, we may face competition from many different entities now and in the future. As of now, we face competition from the following products:

 

●

Bose Corporation’s Bose Frames. These are a Bluetooth eyewear product, but in a bulkier form factor and with what we believe to be comparable models at a higher list price ($249 MSRP) than Lucyd Lyte 2.0 ($199).

 

●

Amazon’s Echo Glasses. Another entry in the Bluetooth eyewear space offered at a $249 list price. Not available directly from the manufacturer in prescription, and in only one frame shape. The cost of the Amazon Echo Glasses is higher than Lucyd Lyte. While lightweight like Lucyd Lyte glasses, Amazon Echo Glasses have, in our view, a less fashionable form factor, and the battery life is about half of that of Lucyd Lyte.

 

●

Snapchat Spectacles. This is a camera-focused smart eyewear product and, in our view, not a direct competitor as to its style, weight, pricing and suitability for all-day wear, as compared with our products; however, Snapchat Spectacles may introduce further entries in the space that may directly compete with Lucyd Lyte. Snapchat Spectacles Version 3 have a list price of $380.

 

 

●

Ray-Ban Stories Glasses. Developed in association with Facebook, are a camera-focused smart eyewear product, and despite the fact they are available in prescription, in our view not a direct competitor; Ray-Ban may, however, introduce further entries in the space that may directly compete with Lucyd Lyte. Ray-Ban Spectacles have a well-known and respected brand, and a list price starting at $299, which makes them 50% more expensive than Lucyd Lyte. They weigh considerably more (20-70% depending upon the Lyte model) than Lucyd Lyte glasses, have a shorter battery life, thicker temple profiles and are not water resistant.

 

All of the competitors discussed above have substantially greater manufacturing, financial, research and development, personnel and marketing resources than we do. As a result, although we believe our products are currently superior, our competitors may be able to develop superior products, and compete more aggressively and sustain their competitive advantage over a longer period of time than us. Our products may be rendered obsolete in the face of competition.

 

Legal Proceedings

 

We are not the subject of any material pending legal proceedings, however, may from time to time become a party to various legal proceedings arising in the ordinary course of business. Except as discussed below, we are not the subject of any pending legal proceedings.

 

Employees

 

As of December 31, 2022, we had 9 full time employees with two in product development, two in sales, one in finance, one in customer service, one in marketing, one in graphic design and one in video production. Employees are supported by a number of consultants and part time employees, including a group of 8 independent sales representatives.

 

Properties

 

Ourexecutive offices are located at 11900 Biscayne Blvd., Suite 630, North Miami, Florida 33181. Our executive offices are provided to usby the parent of our majority stockholder, Tekcapital. We consider our current office space adequate for our operations.

 

From June 1, 2020, through February 1, 2022, we paid Tekcapital $25,000 per fiscal quarter under a management service agreement, which included rent-free office space, utilities, advisory services and other services. This agreement was amended effective February 1, 2022 such that we are billed $35,000 per fiscal quarter and no longer receive rent-free office space. Since then, Tekcapital bills us for an allocation of rent paid by Tekcapital on our behalf, and we recognized $74,442 of expense related to rent for the year ended December 31, 2022. Our management service agreement with Tekcapital does not stipulate a specific maturity date, and can be terminated with 30 calendar days written notice by any party.

 

Other

 

Our telephone number is (954) 826-0329 and our Internet website address is www.lucyd.co. We make available free of charge on or through our Internet website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Schedule 14A, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such materials with, or furnish them to, the Securities and Exchange Commission (the “SEC”). Alternatively, you may also access our reports at the SEC’s website at www.sec.gov.

 

 

MANAGEMENT

 

The following table sets forth certain information regarding our board of directors, our executive officers, and some of our key employees.

 

Name		Age		Position
Harrison R. Gross		30		Chief Executive Officer and Director
Konrad Dabrowski		40		Chief Financial Officer
David Eric Cohen		50		Chief Technology Officer
Frank Rescigna		62		Director
Kristen Mclaughlin		50		Director
Louis Castro		64		Director
Olivia C. Bartlett		64		Director

 

Harrison Gross is one of the founders of Innovative Eyewear and has served as our Chief Executive Officer and as a director since August 2019, where he guides the company’s product and brand development. Prior to his employment at Innovative Eyewear, from August 2017 to August 2019, Mr. Gross served in various positions, including chief executive officer and media & UX lead, of Lucyd Ltd., our largest stockholder and the licensor of our technology which is also a smart eyewear development company where he developed the Lucyd brand identity and oversaw general operations and product development. Additionally, from November 2015 to August 2021, Mr. Gross served as the Digital Media Manager of Tekcapital PLC (“Tekcapital”) (LON: TEK), a university intellectual property investment firm that is the parent company of Tekcapital Europe Limited, and Lucyd Ltd, the holding company for Tekcapital’s shares in Innovative Eyewear, where he created, developed and marketed for the company’s licensed properties. Prior to that, from October 2013 to September 2014, Mr. Gross worked as a credit analyst for a Verizon, Inc. contractor, where he managed credit systems and provided support to Verizon agents. Mr. Gross is a graduate of Columbia University with a BA in Writing and received a BA in Jewish Studies from the Jewish Theological Seminary. Mr. Gross is well qualified to serve as a director due to his substantial knowledge of our product and his experience in marketing, product and app development.

 

Konrad Dabrowski has served as our Chief Financial Officer on a part-time basis since August 2019. Between June 2017 and July 2020, Mr. Dabrowski has served as the group controller, and starting on July 2020 the chief financial officer of Tekcapital PLC (“Tekcapital”), where he co-manages the group’s investment strategy and oversees financial reporting for all of its portfolio companies. Prior to his employment at Tekcapital, from March 2016 to June 2017, Mr. Dabrowski was a Global Accounting Manager for Restaurant Brands International (NYSE:QSR), a multinational fast food holding company, where he oversaw accounting and tax projects for Burger King within the Europe Middle East and Africa (EMEA) market. Prior to his employment at Restaurant Brands International, Mr. Dabrowski was an Audit Manager at Deloitte, where he managed end-to-end accounting audits for a portfolio of public and private corporate clients. Mr. Dabrowski has a Master’s in Finance and Banking from the Warsaw School of Economics and is a Certified Public Accountant.

 

David Eric Cohen is one of the founders of Innovative Eyewear and has served as our Chief Technology Officer since September 2019. Prior to his employment at Innovative Eyewear, from August 2017 to August 2019, Mr. Cohen served as the chief technology officer of Lucyd Ltd., a smart eyewear development company, where he led the company’s technological advancements and digital ad campaigns. Also, prior to his employment at Innovative Eyewear, from September 2009 to October 2019, Mr. Cohen served as President of Emaze Design Agency, a digital design agency, where he led the development of web and applications for e-commerce, web performance monitoring, website design and mobile applications. Prior to his employment at Emaze Design Agency, Mr. Cohen was lead Business Intelligence Specialist at Jewish General Hospital where he assisted with the data solutions and business processes and requirements. He received a BS in Computer Science from the Academy of Bordeaux and an MS in Advanced Technician & Information Systems Management from Hadassah University.

 

 

Frank Rescigna has served as a director since August 2021. Mr. Rescigna has more than 25 years of brand building and sales experience in the eyewear industry. Prior to his directorship at Innovative Eyewear, from October 2019 to May 2021, Mr. Rescigna was the Director of Global Sales at House of Wu, a global wholesale luxury bridal and evening dress distributor, where he led the company’s sales strategy throughout the world. Prior to his employment at House of Wu, from September 2018 to September 2019, Mr. Rescigna was the President of Teka Eyewear, a boutique global wholesale luxury eyewear distributor specializing in exotic materials, where he managed all aspects of its sales organization and operations. Prior to his employment at Teka Eyewear, from March 2015 to August 2018, Mr. Rescigna was the Senior Vice President of Global Sales at Wiley X, a multi-brand global eyewear company that designs and distributes sunglasses, where he managed the company’s sales activities at the corporate and sales level. Prior to his employment at Wiley X, from February 2011 to February 2015, Mr. Rescigna was the President of Jewelry & Global Brand Licensing for Guess Inc. (NYSE: GES), a global fashion/lifestyle company with varying business models, distribution models and products, where he assisted the company with the expansion of its brand and new brands/products. Prior to his employment at Guess, from February 2004 to January 2011, Mr. Rescigna was the President of Viva International Group, a large eyewear company that designs, manufactures and distributes core and luxury global brands, where he led the company’s expansion and integration with its parent company Highmark Vision Holding Company. He received a degree in Opticianry from Middlesex College. Mr. Rescigna is well qualified to serve as a director due his substantial brand and sales experience and his experience in the eyewear industry.

 

Kristen Mclaughlin has served as one of our directors since August 2021. Ms. Mclaughlin has 20 years’ experience launching, managing and developing products in the eyewear, accessories, cosmetics and skincare industries. From March 2019 to April 2020, Ms. Mclaughlin served as the Global Marketing Director at DePasquale Companies, a skincare, hair care and cosmetics manufacturer, where she led the global marketing strategy and new product development. Prior to her employment at DePasquale Companies, from March 2000 to January 2019, Ms. Mclaughlin was employed at Silhouette International, an eyewear manufacturer, where she served as the Director of Marketing: Eyewear Manufacturer, Regional Sales Manager, and Brand Manager: Daniel Swarovski Crystal Eyewear. While at Silhouette International, Ms. Mclaughlin led the company’s brand portfolio in the U.S. and its brand direction, product development and campaign content. She has a BS and MBA from Ramapo College of New Jersey. Ms. Mclaughlin is well qualified to serve as a director due to her substantial experience in the eyewear industry and her experience in brand and product development.

 

Louis Castro has served as one of our directors since August 2021. Mr. Castro is an experienced public company director and chartered accountant. Mr. Castro is currently on the board of directors of the following public companies (1) Tekcapital where he has been a director since December 2019, (2) Orosur Mining Inc. (TSE:OMI), a company exploring for minerals in South America, where he has been chairman of the board since April 2020, (3) Stanley Gibbons Group plc (LON:SGI), a company that specializes in the retailing of collectable stamps and similar products, where he has been a director since June 2016, (4) Tomco Energy plc (LON:TOM), an oil exploration and technology company, where he has been a director since April 2021, (5) Predator Oil & Gas Holdings plc (LON:PRD), an oil and gas exploration company, where he has been a director since July 2020, and (6) Veteran Capital Corp. (TSX-V:VCC), a capital pool company, where he has been a director since January 2021. From September 2012 to June 2016, Mr. Castro was a director and, from September 2014 to June 2016 served as the Chief Financial Officer, of Eland Oil & Gas plc, a Nigerian focused upstream oil and natural gas exploration and production company, where he was responsible for the company’s finance, legal and corporate finance activities. Prior to his employment at Eland, from May 2011 to May 2014, Mr. Castro served as Head of Capital Markets and then as Chief Executive Officer of Northland Capital Partners, an investment bank, where he was responsible for the investment banks day-to-day activities. He is a fellow of the Institute of Chartered Accountants of England & Wales, has a double degree in Engineering Production and Economics from Birmingham University and attended the Postgraduate Advanced Course in Production Management and Methods at Cambridge University. Mr. Castro is well qualified to serve as a director due to his substantial experience as a director of public companies and his distinction as chartered accountant.

 

Olivia C. Bartlett has served as one of our directors since August 2021. Ms. Bartlett has been in the eyewear industry for over 40 years holding various roles including optician, optical manager, marketing manager and operations management. Since September 2015, Ms. Bartlett has been the Chief Operating Officer of Todd Rogers Eyewear, a specialty eyewear company, where she manages the day-to-day operations of the company. Prior to her time at Todd Rogers Eyewear, from March 2010 to May 2015, Ms. Bartlett was the sales representative for eyewear sales in the northeast of Massachusetts for Safilo USA, a specialty eyewear company. Additionally, from September 2013 to May 2018, Ms. Bartlett was an Adjunct Professor at Benjamin Franklin Institute of Technology in Boston, Massachusetts. Since February 2020 Ms. Bartlett has been the President of the Opticians Association of America, a national organization representing the professional, business, educational, legislative and regulatory interests of opticianry. Prior to that, Ms. Bartlett was a director for ten years for the Opticians Association of Massachusetts. Ms. Bartlett has received a number of awards through her time in the industry, including but not limited to, the 2020 Eyecare Business Game Changer Award and the 2020 and 2018 Vision Monday Most Influential Woman Executive. Ms. Bartlett received her Massachusetts Opticians license in 1987 and is ABO certified. Ms. Bartlett received her BA in Political Science from Clark University. Ms. Bartlett is well qualified to serve as a director due to her substantial experience in the optical industry.

 

 

Number and Terms of Office of Officers and Directors

 

Our board of directors consists of five members. Our directors are appointed for one-year terms to hold office until the next annual general meeting of our stockholders or until removed from office in accordance with our second amended and restated bylaws.

 

Our officers are appointed by the board of directors and serve at the discretion of the board of directors, rather than for specific terms of office. Our board of directors is authorized to appoint persons to the offices set forth in our second amended and restated bylaws, as it deems appropriate.

 

Director Independence and Committees of the Board of Directors

 

Director Independence

 

Of our directors, we have determined that Frank Rescigna, Mr. Louis Castro and Mss. Kristen Mclaughlin and Olivia Bartlett are “independent” directors under NASDAQ listing standards, while Harrison Gross is not independent under such standards. We have also determined that each of the three members of the Audit Committee is “independent” for purposes of Section 10A(m)(3) of the Exchange Act and the rules promulgated thereunder and under the NASDAQ listing standards. Further, the Board has determined that each of the two members of both the Compensation Committee and the Nominating and Corporate Governance Committee is “independent” under NASDAQ listing standards.

 

Board Committees

 

We have three standing committees of the Board: the Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee. Each of the board committees act pursuant to a separate written charter adopted by our board of directors, each of which is available on our website at www.lucyd.co. Our board of directors may at any time or from time to time appoint certain other committees in its sole discretion as it deems necessary or appropriate to carry out its functions.

 

Audit Committee

 

The Audit Committee consists of Mr. Louis Castro (Chair) and Mss. Kristen Mclaughlin and Olivia Bartlett. The Board has determined that all of the members of the Audit Committee are “independent,” as defined by NASDAQ listing standards and by applicable SEC rules. In addition, the Board has determined that Mr. Castro is an audit committee financial expert, as that term is defined by the SEC rules, by virtue of having the following attributes through relevant experience: (i) an understanding of generally accepted accounting principles and financial statements; (ii) the ability to assess the general application of such principles in connection with the accounting for estimates, accruals, and reserves; (iii) experience preparing, auditing, analyzing, or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities; (iv) an understanding of internal controls and procedures for financial reporting; and (v) an understanding of audit committee functions.

 

The function of the Audit Committee relates to oversight of the auditors, the auditing, accounting, and financial reporting processes, and the review of the Company’s financial reports and information. In addition, the functions of the Audit Committee will include, among other things, recommending to the Board the engagement or discharge of independent auditors, discussing with the auditors their review of the Company’s quarterly results and the results of their audit, and reviewing the Company’s internal accounting controls.

 

 

Compensation Committee

 

The Compensation Committee consists of Ms. Kristen Mclaughlin (Chair) and Mr. Louis Castro. The Board has determined that all of the members of the Compensation Committee are “independent,” as defined by NASDAQ listing standards. The responsibility of the Compensation Committee is to review and approve the compensation and other terms of employment of our President and Chief Executive Officer and our other executive officers, including all of the executive officers named in the Summary Compensation Table under the heading “Executive Compensation” below (the “named executive officers”). Among its other duties, the Compensation Committee oversees all significant aspects of the Company’s compensation plans and benefit programs. The Compensation Committee annually reviews and approves corporate goals and objectives for the President and Chief Executive Officer’s compensation and evaluates the Chief Executive Officer’s performance in light of those goals and objectives. The Compensation Committee also recommends to the Board the compensation and benefits for members of the Board. The Compensation Committee has also been appointed by the Board to administer our 2021 Equity Incentive Plan. The Compensation Committee does not delegate any of its authority to other persons.

 

Nominating and Corporate Governance Committee 

 

The Nominating and Corporate Governance Committee consists of Mss. Olivia Bartlett (Chair) and Kristen Mclaughlin and Mr. Harrison Gross. The majority of committee members are independent under applicable NASDAQ rules and regulations. The Nominating and Corporate Governance Committee is responsible for, among other things, considering potential board members, making recommendations to the full board as to nominees for election to the board, assessing the effectiveness of the board and implementing our corporate governance guidelines.

 

Code of Ethics

 

We have adopted a formal code of ethics that applies to our directors and principal executives and financial officers or persons performing similar functions. A copy of our Code of Ethical Conduct can be found on our website under “Investors” at www.lucyd.co.

 

 

Executive Compensation

 

The following table sets forth the aggregate compensation paid to our named executive officers for the fiscal years ended December 31, 2022 and 2021. Individuals we refer to as our “named executive officers” include our Chief Executive Officer, our Chief Financial Officer and our Chief Technology Officer.

 

Summary Compensation Table

 

Name and Principal Position		Year			Salary(1) ($)				Bonus ($)				Option Awards ($)(3)				Non-Equity Incentive Plan Compensation ($)				Nonqualified Deferred Compensation Earnings ($)				All Other Compensation ($)				Total ($)
Harrison Gross,		2022				114,758				-				-				-				-				-				114,758
Chief Executive Officer		2021				69,584				-				1,781,980	(2)			-				-				-				1,851,564
Konrad Dabrowski,		2022				105,500				-				-				-				-				-				105,500
Chief Financial Officer		2021				21,885				-				158,388				-				-				-				180,273
David Eric Cohen,		2022				70,270				-				-				-				-				-				70,270
Chief Technology Officer		2021				38,401				-				158,382				-				-				-				158,382

 

(1)

Salary amounts shown for Mr. Cohen include $34,500 and $38,401 paid in 2022 and 2021, respectively, to Mr. Cohen as an independent consultant, prior to his hire as an employee on October 1, 2022.

(2)

Consists of 700,000 options to purchase common stock of the Company issued to Mr. Gross for services rendered to the Company for the fiscal year ended December 31, 2021.

(3)

These amounts have been calculated in accordance with Accounting Standards Codification (“ASC”) 718. A discussion of assumptions used in valuation of option awards may be found in Note 2 to our Financial Statements for fiscal year ended December 31, 2022, included in this prospectus. These amounts reflect our accounting expense for these stock options and do not correspond to the actual value that may be recognized by our named executive officers.

 

Employment Arrangements with our Executive Officers

 

Harrison Gross

 

On August 11, 2021, we entered into an employment agreement with Harrison Gross to serve in the capacity of the Chief Executive Officer of the Company. We agreed to pay Mr. Gross an annual base salary of $85,800 for the remainder of 2021, and we also agreed that from the initial public offering date in August 2022, we increased his base salary to $150,000 per year. Pursuant to the terms of the employment agreement, our Board may exercise its sole discretion to grant Mr. Gross an annual bonus, the amount of which bonus shall be determined in the sole discretion of our Board. Additionally, in 2021, we granted Mr. Gross an option to purchase 100,000 shares of our common stock.

 

The employment agreement has an initial term of three years, and will terminate on the third anniversary of the effective date unless Mr. Gross and the Company agree otherwise in writing. If we terminate the employment agreement for any reason other than for cause (as such is defined in the agreement) or Mr. Gross terminates his employment for good reason (as such is defined in the agreement): (1) Mr. Gross shall be entitled to payment of his base salary for the balance of the agreement’s term; (2) if Mr. Gross elects to continue group health insurance benefits, we shall reimburse Mr. Gross for any COBRA premiums he pays for the duration of COBRA’s coverage; and, (3) we shall provide Mr. Gross with payment of all accrued amounts (as defined in the agreement).

 

 

Konrad Dabrowski

 

On August 11, 2021, we entered into an employment agreement with Konrad Dabrowski to serve as the Chief Financial Officer of the Company on a part-time basis, which agreement became effective on September 1, 2021. Mr. Dabrowski devotes 50% of his business time to our Company. We agreed to pay Mr. Dabrowski an annual base salary of $100,000. Pursuant to the terms of the employment agreement, we may exercise our discretion to grant Mr. Dabrowski an annual bonus, the amount of which bonus shall be determined in the sole discretion of the Company. Additionally, in 2021, we granted Mr. Dabrowski an option to purchase 60,000 shares of our common stock.

 

Following the effective date, the employment agreement shall continue, unless terminated by Mr. Dabrowski or the Company. Mr. Dabrowski’s employment is at-will, which may be terminated by the Company or by Mr. Dabrowski at any time and for any reason. Pursuant to the terms of the employment agreement, a sixty days’ written notice of termination or resignation is required. If Mr. Dabrowski notifies us of his resignation, or if we terminate Mr. Dabrowski’s employment agreement, the Company reserves the right to determine, in its sole discretion, whether Mr. Dabrowski will be required to actively work during the sixty-day notice period; however, Mr. Dabrowski will be entitled to receive his base salary for the duration of the sixty day notice period. The Company has the right to terminate Mr. Dabrowski’s employment agreement for cause (as defined in the agreement), which termination shall be effective immediately.

 

David Eric Cohen

 

David Cohen was an independent consultant for the company from inception until October 1, 2022, when we offered him a full-time letter of employment. He accepted and has been the full-time Chief Technology since then. The company pays him $140,000 annually to serve in this role. Pursuant to the terms of the employment agreement, we may exercise our discretion to grant Mr. Cohen an annual bonus, the amount of which bonus shall be determined in the sole discretion of the Company.

 

Following the effective date, the employment agreement shall continue, unless terminated by Mr. Cohen or the Company. Mr. Cohen’s employment is at-will, which may be terminated by the Company or by Mr. Cohen at any time and for any reason. Pursuant to the terms of the employment agreement, a sixty days’ written notice of termination or resignation is required. If Mr. Cohen notifies us of his resignation, or if we terminate Mr. Cohen’s employment agreement, the Company reserves the right to determine, in its sole discretion, whether Mr. Cohen will be required to actively work during the sixty-day notice period; however, Mr. Cohen will be entitled to receive his base salary for the duration of the sixty day notice period. The Company has the right to terminate Mr. Cohen’s employment agreement for cause (as defined in the agreement), which termination shall be effective immediately.

 

Additionally, in 2021, we granted Mr. Cohen an option to purchase 60,000 shares of our common stock.

 

The following table sets forth all compensation paid to our Board members during the year ended December 31, 2022:

 

Name		Fees Earned or Paid in Cash ($)				Stock Awards ($)				Option Awards ($)				Non-Equity Incentive Plan Compensation ($)				Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)				All Other Compensation ($)				Total ($)
Frank Rescigna			1,875				-				-				-				-				-				1,875
Kristen Mclaughlin			7,500				-				-				-				-				-				7,500
Louis Castro			11,250				-				-				-				-				-				11,250
Olivia C. Bartlett			3,750				-				-				-				-				-				3,750

 

 

Outstanding Equity Awards

 

The following table sets forth outstanding equity awards to our named executive officers as of December 31, 2022.

 

		Option awards																		Stock awards
Name		Number of securities underlying unexercised options (#) exercisable				Number of securities underlying unexercised options (#) unexercisable				Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)				Option exercise price ($)				Option expiration date		Number of shares or units of stock that have not vested (#)				Market value of shares of units of stock that have not vested ($)				Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested (#)				Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
Harrison Gross			250,000				125,000				-			$	1.00			04/01/2024			-				-				-				-
Harrison Gross			200,000				400,000				-			$	3.56			05/05/2025			-				-				-				-
Harrison Gross			44,432				55,568				-			$	3.56			11/11/2024			-				-				-				-
Konrad Dabrowski			26,656				33,344				-			$	3.56			11/11/2024			-				-				-				-
David Eric Cohen			26,656				33,344				-			$	3.56			12/01/2024			-				-				-				-

 

Our 2021 Equity Incentive Plan was adopted by the Board and approved by our shareholders on July 1, 2021, under which:

 

(i)

Harrison Gross was issued stock options on August 11, 2021, to purchase 100,000 shares of our common stock;

 

(ii)

Konrad Dabrowski was issued stock options on August 11, 2021, to purchase 60,000 shares of our common stock;

 

(iii)

David Eric Cohen was issued stock options on September 1, 2021, to purchase 60,000 shares of our common stock;

 

 

All of these stock options issued under our 2021 Equity Incentive Plan are subject to time-based vesting.

 

Additionally, the following awards were granted by the Company prior to the approval of the 2021 Equity Incentive Plan:

 

(i)	Mr. Gross was issued stock options on May 5, 2021 to purchase 600,000 shares of our common stock, which are subject to time-based vesting; and

 

Option Exercises and Stock Vested

 

There were no options exercised by our executive officers during the years ended December 31, 2022 or 2021.

 

Employee Benefit Plans

 

We currently do not provide retirement, health, or welfare benefits to any of our employees.

 

Non-qualified Deferred Compensation

 

None of our employees participate in or have account balances in non-qualified defined contribution plans or other non-qualified deferred compensation plans maintained by us. Our Compensation Committee may elect to provide our officers and other employees with non-qualified defined contribution or other non-qualified compensation benefits in the future if it determines that doing so is in the Company’s best interest.

 

2021 Equity Incentive Plan

 

General

 

Our 2021 Equity Incentive Plan was adopted by the Board and approved by our shareholders on July 1, 2021. The general purposes of the 2021 Equity Incentive Plan are to (i) enable the Company and its subsidiaries to attract and retain the types of employees, consultants, and directors who will contribute to the Company’s long-range success; (ii) provide incentives that align the interests of employees, consultants, and directors with those of our shareholders; and (iii) promote the success of the Company’s business.

 

Description of the 2021 Equity Incentive Plan

 

The following description of the principal terms of the 2021 Equity Incentive Plan is a summary and is qualified in its entirety by the full text of the 2021 Equity Incentive Plan.

 

Administration. The 2021 Equity Incentive Plan is administered by a committee appointed by our Board, or in the Board’s discretion, by the Board (as applicable, the “Incentive Plan Administrator”). Subject to the terms of the 2021 Equity Incentive Plan, the Incentive Plan Administrator has the authority to (a) determine the eligible individuals who are to receive awards, (b) determine the terms and conditions of each award, including exercise price, vesting or performance criteria, performance period, and terms of the award, (c) determine whether vesting and performance criteria have been achieved, (d) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, or otherwise modify or amend awards, (e) construe and interpret the 2021 Equity Incentive Plan, including the ability to reconcile any inconsistency in, correct any defect in and/or supply any omission in the plan and award agreement; any instrument or agreement, (f) promulgate, amend, and rescind rules and regulations relating to the administration of the 2021 Equity Incentive Plan, and (g) exercise discretion to make any and all other determinations which it determines to be necessary or advisable for the administration of the 2021 Equity Incentive Plan and awards granted thereunder. The Incentive Plan Administrator may also delegate its authority to a subcommittee or to one or more officers of the Company, subject to terms and conditions determined by the Incentive Plan Administrator. All decisions made by the Incentive Plan Administrator are final and binding on the Company and the participants.

 

 

Types of Awards. The 2021 Equity Incentive Plan provides for the grant of stock options, which may be incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), performance share awards, and other cash-based or equity-based awards, or collectively, awards.

 

Share Reserve. A total equal to 20% of our issued and outstanding common stock shall be available for the grant of awards under the 2021 Equity Incentive Plan.

 

If options, stock appreciation rights, restricted stock units or any other awards are forfeited, cancelled or expire before being exercised or settled in full, the shares subject to such awards will again be available for issuance under the 2021 Equity Incentive Plan. If restricted stock or shares issued upon exercise of an option are reacquired by the Company pursuant to a forfeiture provision, repurchase right or for any other reason, then such shares will again be available for issuance under the 2021 Equity Incentive Plan. Notwithstanding the foregoing, shares applied to pay the exercise price of an option or satisfy withholding taxes related to any award will not become available for issuance under the 2021 Equity Incentive Plan.

 

Shares issued under the 2021 Equity Incentive Plan may be authorized but unissued shares or treasury shares. As of December 31, 2022, awards covering 2,332,500 shares of Common Stock were issued, of which 1,685,000 option awards were granted by the Company prior to the approval of the Plan and 647,500 option awards were granted subject to the 2021 Equity Incentive Plan.

 

Incentive Stock Option Limit. No more than 25,000,000 shares of Common Stock may be issued under the 2021 Equity Incentive Plan upon the exercise of ISOs.

 

Eligibility. Employees (including officers), non-employee directors and consultants who render services to the Company or a parent or subsidiary thereof (whether now existing or subsequently established) are eligible to receive awards under the 2021 Equity Incentive Plan. ISOs may only be granted to employees of the Company or a parent or subsidiary thereof (whether now existing or subsequently established).

 

Stock Options. A stock option is the right to purchase a certain number of shares of stock at a fixed exercise price which, pursuant to the 2021 Equity Incentive Plan, may not be less than 100% of the fair market value of Common Stock on the date of grant. Subject to limited exceptions, an option may have a term of up to 10 years and will generally expire sooner if the optionholder’s service terminates. Options will vest at the rate determined by the Incentive Plan Administrator. An optionholder may pay the exercise price of an option in cash, or, with the Incentive Plan Administrator’s consent, with shares of stock the optionholder already owns, with proceeds from an immediate sale of the option shares, through a net exercise procedure or by any other method permitted by applicable law.

 

Tax Limitations on Incentive Stock Options. The aggregate fair market value, determined at the time of grant, of the Common Stock with respect to ISOs that are exercisable for the first time by an optionholder during any calendar year under all of the Company’s stock plans may not exceed $100,000. Options or portions thereof that exceed such limit will generally be treated as NSOs. No ISO may be granted to any person who, at the time of the grant, owns or is deemed to own stock possessing more than 10% of the Company’s total combined voting power or that of any of the Company’s affiliates unless (a) the option exercise price is at least 110% of the fair market value of Common Stock on the date of grant and (b) the term of the ISO does not exceed five years from the date of grant.

 

Stock Appreciation Rights. A stock appreciation right provides the recipient with the right to the appreciation in a specified number of shares of stock. The Incentive Plan Administrator determines the exercise price of stock appreciation rights granted under the 2021 Equity Incentive Plan, which may not be less than 100% of the fair market value of Common Stock on the date of grant. A stock appreciation right may have a term of up to 10 years and will generally expire sooner if the recipient’s service terminates. SARs will vest at the rate determined by the Incentive Plan Administrator. Upon exercise of a SAR, the recipient will receive an amount in cash, stock, or a combination of stock and cash determined by the Incentive Plan Administrator, equal to the excess of the fair market value of the shares being exercised over their exercise price. 

 

 

Restricted Stock Awards. Shares of restricted stock may be issued under the 2021 Equity Incentive Plan and may be subject to vesting, as determined by the Incentive Plan Administrator. Recipients of restricted stock generally have all of the rights of a shareholder with respect to those shares, including voting rights and dividends, except as provided in the award agreement.

 

Restricted Stock Units. A restricted stock unit is a right to receive a share, at no cost to the recipient, upon satisfaction of certain conditions, including vesting conditions, established by the Incentive Plan Administrator. RSUs vest at the rate determined by the Incentive Plan Administrator and any unvested RSUs will generally be forfeited upon termination of the recipient’s service. Settlement of restricted stock units may be made in the form of cash, stock or a combination of cash and stock, as provided in the award agreement and as determined by the Incentive Plan Administrator. Recipients of restricted stock units generally will have no voting or dividend rights prior to the time the vesting conditions are satisfied, and the award is settled.

 

Performance Share Award. A performance share award is a right to receive a share or share units based upon the Company’s performance during a specified performance period, as determined by the Incentive Plan Administrator. The Incentive Plan Administrator has the discretion to determine: (i) the number of shares or stock-denominated units subject to a Performance Share Award granted to any recipient; (ii) the performance period applicable to any award; (iii) the conditions that must be satisfied for a recipient to earn an award; and (iv) the other terms, conditions and restrictions of the award.

 

Cash Awards and Other Equity-Based Awards. The Incentive Plan Administrator may grant cash awards and other awards based in whole or in part by reference to Common Stock, either alone or in tandem with other awards. The Incentive Plan Administrator will determine the terms and conditions of any such awards.

 

Changes to Capital Structure. In the event of certain changes in capitalization, including a stock split, reverse stock split, stock dividend, or an extraordinary corporate transaction such as any recapitalization, reorganization, merger, consolidation, combination, or exchange, proportionate adjustments will be made in the number and kind of shares available for issuance under the 2021 Equity Incentive Plan, the limit on the number of shares that may be issued under the 2021 Equity Incentive Plan as ISOs, the number and kind of shares subject to each outstanding award and/or the exercise price of each outstanding award.

 

Change in Control. If the Company is party to certain change in control transactions, each outstanding award will be treated as the Incentive Plan Administrator determines, which may include the continuation, assumption or substitution of an outstanding award, the cancellation of an outstanding award after an opportunity to exercise or the cancellation of an outstanding award in exchange for a payment equal to the value of the shares subject to such award less any applicable exercise price.

 

Transferability of Awards. Unless the Incentive Plan Administrator determines otherwise, an award generally will not be transferable other than by beneficiary designation, a will or the laws of descent and distribution. The Incentive Plan Administrator may permit transfer of an award in a manner consistent with applicable law.

 

Amendment and Termination. The Board may amend or terminate the 2021 Equity Incentive Plan at any time. Any such amendment or termination will not affect outstanding awards. If not sooner terminated, the 2021 Equity Incentive Plan will automatically terminate 10 years after its adoption by the Board. Shareholder approval is not required for any amendment of the 2021 Equity Incentive Plan, unless required by applicable law, government regulation or exchange listing standards.

 

 

Certain Relationships and Related Transactions

 

On occasion we may engage in certain related party transactions. All prior related party transactions were approved by our board of directors and a majority of our issued and outstanding shares of capital stock. Upon the consummation of offering, our policy is that all related party transactions will be reviewed and approved by the Audit Committee of our Board of Directors prior to our entering into any related party transactions.

 

License Agreement

 

On April 1, 2020, we entered into an exclusive, worldwide license agreement with Lucyd Ltd., the majority stockholder of the Company, for the use of the Lucyd brand, and the associated intellectual property and assets (the “License Agreement”). The License Agreement is royalty-free, fully paid up, and perpetual license for the exclusive use of certain assets of Lucyd Ltd. related to Innovative Eyewear current products and trademarks. As compensation for entrance into the License Agreement, we issued Lucyd Ltd. 3,750,000 shares of our common stock. On October 5, 2021, the parties to the License Agreement executed an Addendum, to the exclusive license agreement, which clarified that Innovative Eyewear shall commercialize, continue with any on-going intellectual property prosecutions and pay all maintenance or other patent fees (the “Addendum”). For all new intellectual property, Innovative Eyewear will own control it and be responsible for all prosecution and maintenance costs. The Addendum also confirms that Innovative Eyewear issued Lucyd Ltd. 3,750,000 shares of its common stock as consideration for the license. Please see “Business — Material Agreements” for a more complete description of the License Agreement and Addendum.

 

Management Service Agreement

 

On June 1, 2020, we entered into a management service agreement with Tekcapital Europe Ltd., an affiliate of our majority stockholder, Lucyd Ltd., whose Chief Executive Officer is the father of our Chief Executive Officer, pursuant to which we agreed to pay Tekcapital Europe Ltd. $25,000 per fiscal quarter for rent-free office space, utilities, advisory services and any other services in accordance with Tekcapital Europe Ltd.’s areas of expertise. The management agreement provided for a perpetual term, with the right of either party to terminate for any reason with 30 days’ notice. Effective February 1, 2022, the original management service agreement was amended to have us billed at $35,000 quarterly for advisory and other services, and in addition, Tekcapital Europe Ltd. began to bill us for an allocation of rent paid by Tekcapital Europe Ltd. on our behalf.

 

During the years ended December 31, 2022 and 2021, we incurred $140,000 and $100,000, respectively, under our management services agreement with Tekcapital Europe Ltd., and we also recognized $74,442 of rent expense for the year ended December 31, 2022.

 

Convertible Note Financing

 

On December 1, 2020, we issued a convertible note for an aggregate principal amount of up to $2,000,000 to Lucyd Ltd., the majority stockholder of the Company (the “Note”).

 

On June 1, 2021, we completed the partial conversion of an aggregate of $778,500 of the outstanding balance on the Note, at $1.00 per share, into an aggregate of 778,500 shares of common stock. On September 5, 2021, we completed the partial conversion of an aggregate of $500,002 of the outstanding balance on the Note, at $3.56 per share, into an aggregate of 140,449 shares of common stock.

 

On November 1, 2021, we executed an amended and restated Note, increasing the amount of available financing from $2,000,000 to $3,000,000. On November 16, 2021, we completed the partial conversion of an aggregate of $901,271 of the outstanding balance of the Note, at $3.56 per share, into an aggregate of 253,166 shares of common stock.

 

 

On August 15, 2022, in connection with our initial public offering, we completed the partial conversion of an aggregate of $2,002,280 of the outstanding balance of the Note, at $7.50 per share, into an aggregate of 266,970 shares of common stock. As of the date of this prospectus, $0 remains outstanding on the Note.

 

The Note has an interest rate of 10.0% per annum, is unsecured, matures on December 1, 2023 and provides for conversion, at the election of Lucyd Ltd., into our common stock upon the earlier of (i) the Company consummating an equity financing pursuant to which it raises an aggregate amount of not less than $750,000, (ii) the Company entering into a transaction pursuant to which the Company sells not less than 10% of the Company’s shares, excluding any and all convertible notes which are convertible into shares, (iii) the Company lists its shares on a national securities exchange or (iv) the holder determines to convert the Note. The Note can be converted by the Holder using the price of either (i) the per share purchase price paid for by investors under the terms of recent equity financing, (ii) the closing price of the Company’s trading shares on the relevant public exchange for the day immediately preceding the date of conversion of the Note or (iii) the valuation of the last equity investment. The principal amount and accrued but unpaid interest under each note will automatically convert into shares of our common stock at the stated conversion price per share.

 

Intercompany Loan and Debt Transfer Agreements

 

On June 1, 2021, we entered into an intercompany loan and debt transfer agreement, whereby Lucyd Ltd, Tekcapital plc, Tekcapital Europe Ltd or Tekcapital LLC incurred a debt on behalf of the Company in the amount of $387,328. Pursuant to the terms of the agreement, there is no interest payable on the amount of the debt outstanding, unless we agree otherwise with Lucyd Ltd. The debt, along with any accrued interest and other amounts that may be due in connection with the debt, is repayable by the Company upon demand from Lucyd Ltd, at any time, unless we agree otherwise with Lucyd Ltd. The Company may prepay the whole or any part of the debt at any time unless we agree otherwise.

 

On September 5, 2021, we entered into an intercompany loan and debt transfer agreement, whereby Lucyd Ltd, Tekcapital plc, Tekcapital Europe Ltd or Tekcapital LLC incurred a debt on behalf of the Company in the amount of $500,002. Pursuant to the terms of the agreement, there is no interest payable on the amount of the debt outstanding, unless we agree otherwise with Lucyd Ltd. The debt, along with any accrued interest and other amounts that may be due in connection with the debt, is repayable by the Company upon demand from Lucyd Ltd, at any time, unless we agree otherwise with Lucyd Ltd. The Company may prepay the whole or any part of the debt at any time unless we agree otherwise.

 

See “Executive Compensation” regarding the employment agreements with Harrison Gross and Konrad Dabrowski.

 

Statement of Policy

 

All future transactions between us and our officers, directors or five percent stockholders, and respective affiliates will be on terms no less favorable than could be obtained from unaffiliated third parties and will be approved by a majority of our independent directors who do not have an interest in the transactions and who had access, at our expense, to our legal counsel or independent legal counsel.

 

To the best of our knowledge, during the past three fiscal years, other than as set forth above, there were no material transactions, or series of similar transactions, or any currently proposed transactions, or series of similar transactions, to which we were or are to be a party, in which the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year-end for the last two completed financial years, and in which any director or executive officer, or any security holder who is known by us to own of record or beneficially more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, has an interest (other than compensation to our officers and directors in the ordinary course of business).

 

 

Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters

 

Based solely upon information made available to us, the following table sets forth information as of May 17, 2023, regarding the beneficial ownership of our common stock:

 

●

each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock;

 

●

each of our named executive officers and directors; and

 

●

all our executive officers and directors as a group.

 

The address of each holder listed in the following table, except as otherwise indicated, is 11900 Biscayne Blvd., Suite 630, North Miami, Florida, 33181.

 

Percentage ownership shown in the following table is based on 8,417,239 shares of our common stock outstanding.

 

Name of Beneficial Owner		Shares of Common Stock Beneficially Owned(1)				Percent of Common Stock Beneficially Owned
Named Executive Officers and Directors
Harrison Gross(2)			806,371				8.74	%
Konrad Dabrowski(3)			68,318				*	%
David Eric Cohen(4)			58,318				*	%
Frank Rescigna(5)			25,000				*	%
Kristen McLaughlin(6)			25,000				*	%
Louis Castro(7)			45,000				*	%
Olivia Bartlett(8)			25,000				*	%
All directors and executive officers as a group (7 persons)			1,053,007				11.12	%
5% Stockholders
Lucyd Ltd.(9)			5,189,085				61.65	%

 

*	Less than 1%.

(1)

We have determined beneficial ownership in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended, which is generally determined by voting power and/or dispositive power with respect to securities. Unless otherwise noted, the shares of common stock listed above are owned as of the date of May 17, 2023, and are owned of record by each individual named as beneficial owner and such individual has sole voting and dispositive power with respect to the shares of common stock owned by each of them.

(2)	Includes 806,371 shares of common stock issuable upon exercise of stock options held by Mr. Gross exercisable within 60 days of the date of May 17, 2023.

(3)	Includes 68,318 shares of common stock issuable upon exercise of stock options held by Mr. Dabrowski exercisable within 60 days of the date of May 17, 2023.

(4)	Includes 58,318 shares of common stock issuable upon exercise of stock options held by Mr. Cohen exercisable within 60 days of the date of May 17, 2023.

(5)	Includes 25,000 shares of common stock issuable upon exercise of stock options held by Mr. Rescigna exercisable within 60 days of the date of May 17, 2023.

(6)	Includes 25,000 shares of common stock issuable upon exercise of stock options held by Ms. McLaughlin exercisable within 60 days of the date of May 17, 2023.

(7)	Includes 45,000 shares of common stock issuable upon exercise of stock options held by Mr. Castro exercisable within 60 days of the date of May 17, 2023.

(8)	Includes 25,000 shares of common stock issuable upon exercise of stock options held by Ms. Bartlett exercisable within 60 days of the date of May 17, 2023.

(9)

Tekcapital plc, a public company listed on the London Stock Exchange, owns all issued and outstanding securities of Tekcapital Europe Ltd., which owns all issued and outstanding securities of Lucyd Ltd. As such, Tekcapital plc may be deemed to beneficially own the shares held by Lucyd Ltd. by virtue of their control over Lucyd Ltd. Tekcapital plc disclaims beneficial ownership of the shares held by Lucyd Ltd. Mr. Clifford Gross, the Chief Executive Officer of Tekcapital plc, is the father of Mr. Harrison Gross, our Chief Executive Officer.

 

 

Description of SECURITIES TO BE REGISTERED

 

General

 

Pursuant to our second amended and restated articles of incorporation, our authorized capital stock consists of fifty million (50,000,000) shares of Common Stock, $0.00001 par value and fifteen million (15,000,000) shares of preferred stock, $0.00001 par value. As of the date of this prospectus, there are 8,417,239 shares of common stock outstanding. In addition, as of the date of this prospectus, we had outstanding options to purchase an aggregate of 2,464,500 shares of our common stock, at a weighted average exercise price equal to $2.39 per share. Our authorized but unissued shares of common stock and preferred stock are available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded in the future. The following description summarizes the material terms of our capital stock. Because it is only a summary, it may not contain all the information that is important to you.

 

Common Stock

 

As of May 17, 2023, 8,417,239 shares of common stock were issued and outstanding held by 3,961 stockholders of record. Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and are not entitled to cumulative voting rights.

 

Holders of our common stock are entitled to receive ratably such dividends, if any, as may be declared by our Board of Directors out of funds legally available therefor, subject to any preferential distribution rights of third parties. Upon our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive ratably our net assets available after the payment of all debts and other liabilities.

 

Holders of our common stock have no preemptive, subscription, redemption or conversion rights. There are no redemption or sinking fund provisions applicable to the common stock. All of the outstanding shares of our common stock are fully-paid and nonassessable. The rights, preferences and privileges of holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of any indebtedness of our company.

 

Florida Law and Certain Charter and Bylaw Provisions

 

Florida Anti-Takeover Law. As a Florida corporation, we are subject to certain anti-takeover provisions that apply to public corporations under Florida law.

 

Pursuant to Section 607.0901 of the Florida Business Corporation Act, or the FBCA, a publicly held Florida corporation may not engage in a broad range of business combinations or other extraordinary corporate transactions with an interested shareholder without the approval of the holders of two-thirds of the voting shares of the corporation (excluding shares held by the interested shareholder), unless:

 

●

The transaction is approved by a majority of disinterested directors before the shareholder becomes an interested shareholder;

 

●

The interested shareholder has owned at least 80% of the corporation’s outstanding voting shares for at least five years preceding the announcement date of any such business combination;

 

●

The interested shareholder is the beneficial owner of at least 90% of the outstanding voting shares of the corporation, exclusive of shares acquired directly from the corporation in a transaction not approved by a majority of the disinterested directors; or

 

●

The consideration paid to the holders of the corporation’s voting stock is at least equal to certain fair price criteria.

 

An interested shareholder is defined as a person who, together with affiliates and associates, beneficially owns more than 10% of a corporation’s outstanding voting shares. We have not made an election in our second amended and restated articles of incorporation to opt out of Section 607.0901.

 

In addition, we are subject to Section 607.0902 of the FBCA which prohibits the voting of shares in a publicly held Florida corporation that are acquired in a control share acquisition unless (i) the board of directors approved such acquisition prior to its consummation or (ii) after such acquisition, in lieu of prior approval by the board of directors, the holders of a majority of the corporation’s voting shares, exclusive of shares owned by officers of the corporation, employee directors or the acquiring party, approve the granting of voting rights as to the shares acquired in the control share acquisition. A control share acquisition is defined as an acquisition that immediately thereafter entitles the acquiring party to 20% or more of the total voting power in an election of directors.

 

 

Second Amended and Restated Articles of Incorporation and Bylaws.

 

Our second amended and restated articles of incorporation and second amended and restated bylaws contain provisions that could have the effect of discouraging potential acquisition proposals or tender offers or delaying or preventing a change of control of our company. These provisions are as follows:

 

●

they provide that special meetings of shareholders may be called by the board of directors, on the call of its board of directors or the person or persons authorized to do so by the second amended and restated bylaws, or at the request in writing by shareholders of record owning at least 25% of the issued and outstanding voting shares of common stock; and

 

●

they do not include a provision for cumulative voting in the election of directors. Under cumulative voting, a minority shareholder holding a sufficient number of shares may be able to ensure the election of one or more directors. The absence of cumulative voting may have the effect of limiting the ability of minority shareholders to effect changes in the board of directors.

 

Elimination of Monetary Liability for Officers and Directors

 

Pursuant to the FBCA, our second amended and restated articles of incorporation exclude personal liability for our directors for monetary damages based upon any violation of their fiduciary duties as directors, except as to liability for any breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or any transaction from which a director receives an improper personal benefit. This exclusion of liability does not limit any right which a director may have to be indemnified and does not affect any director’s liability under federal or applicable state securities laws. We have agreed to indemnify our directors against expenses, judgments, and amounts paid in settlement in connection with any claim against a director if he acted in good faith and in a manner he believed to be in our best interests.

 

Indemnification of Officers and Directors

 

Our second amended and restated articles of incorporation also contain provisions to indemnify the directors, officers, employees or other agents to the fullest extent permitted by the FBCA. These provisions may have the practical effect in certain cases of eliminating the ability of shareholders to collect monetary damages from directors. We are also a party to indemnification agreements with each of our directors. We believe that these provisions will assist us in attracting or retaining qualified individuals to serve as our directors.

 

Disclosure of Commission Position on Indemnification for Securities Act Liabilities

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

Transfer Agent and Registrar

 

The name, address and telephone number of our stock transfer agent is VStock Transfer, LLC, 18 Lafayette Pl, Woodmere, New York 11598, (212) 828-8436.

 

Listing

 

Our common stock and the Listed Warrants are currently listed on Nasdaq under the symbols “LUCY” and “LUCYW”, respectively.

 

 

SELLING STOCKHOLDERS

 

The shares of common stock being registered for resale hereby consist of shares that have been issued or are issuable upon exercise of outstanding warrants that were issued to the selling stockholders in a past private placement of the Company. We are registering the shares of common stock in order to permit the selling stockholders to offer the shares for resale from time to time. Except as set forth in this prospectus and except for certain ownership of our securities, the selling stockholders have not had any material relationship with us within the past three years.

 

The table below lists the selling stockholders and other information regarding the ownership of the shares of common stock (including shares of common stock issuable upon conversion or exercise of outstanding securities registered hereunder) by the selling stockholders. The second column lists the number of shares of common stock (including shares of common stock issuable upon conversion or exercise of outstanding securities registered hereunder) owned by the selling stockholders prior to this offering. The third column lists the shares of common stock (including shares of common stock issuable upon conversion or exercise of outstanding securities registered hereunder) being offered by this prospectus by the selling stockholders. The fourth and fifth columns list the number and percentage, respectively, of shares of common stock owned by the selling stockholders after the closing of the offering, based on their ownership as of the date of this prospectus, based on 8,417,239 shares of common stock outstanding, and assuming the sale of all of the shares offered by the selling stockholders pursuant to this prospectus.

 

Name of Selling Stockholder		Number of Shares Owned Prior to Offering(1)				Maximum Number of Shares to be Sold Pursuant to this Prospectus(1)				Number of Shares Owned After Offering(2)				Percentage Owned After Offering(2)
Anson East Master Fund LP(3)			60,000				60,000				-				-
Anson Investments Master Fund LP(4)			240,000				240,000				-				-

 

*

Less than 1%

(1)

The number of shares is based upon the number of shares of common stock (including shares of common stock issuable upon exercise of outstanding warrants registered hereby) held by each selling stockholder on the books and records of the company and its transfer agent. This column does not include any other securities that a selling stockholder may hold, including any other warrants that such selling stockholder may hold, that are not applicable to this registration statement.

(2)

The “Number of Shares Owned After Offering” assumes the sale of all of the shares offered by the Selling Stockholders pursuant to this Selling Stockholder Prospectus. The “Percentage of Shares Owned After Offering” are based on 8,417,239 shares of our common stock outstanding and assumes for each Selling Stockholder that all shares registered for such Selling Stockholder herein are issued to the Selling Stockholders and sold and assuming the exercise of all warrants, held by the applicable Selling Stockholders. This column does not include any other securities that a selling stockholder may hold, including any other warrants that such selling stockholder may hold, that are not applicable to this registration statement.

(3)

Anson Advisors Inc. and Anson Funds Management LP, the Co-Investment Advisers of Anson East Master Fund LP, hold voting and dispositive power over the shares held by Anson East Master Fund LP. Bruce Winson is the managing member of Anson Management GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc. Mr. Winson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these shares except to the extent of their pecuniary interest therein.

(4)

Anson Advisors Inc. and Anson Funds Management LP, the Co-Investment Advisers of Anson Investments Master Fund LP, hold voting and dispositive power over the shares held by Anson Investments Master Fund LP. Bruce Winson is the managing member of Anson Management GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc. Mr. Winson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these shares except to the extent of their pecuniary interest therein.

 

 

PLAN OF DISTRIBUTION

 

We are registering the shares of common stock to permit the resale of these shares of common stock (including shares of common stock issuable upon conversion or exercise of outstanding securities) by the holders thereof (and such holders’ successors and assigns) from time to time after the date of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of common stock. We will bear all fees and expenses incident to our obligation to register the shares of common stock.

 

●

The selling stockholders may sell all or a portion of the shares of common stock owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s commissions. The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

 

●

In the over-the-counter market;

 

●

in transactions otherwise than on these exchanges or systems or in the over-the-counter market;

 

●

through the writing of options, whether such options are listed on an options exchange or otherwise;

 

●

ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

 

●

block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

 

●

purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

 

●

an exchange distribution in accordance with the rules of the applicable exchange;

 

●

privately negotiated transactions;

 

●

short sales;

 

●

sales pursuant to Rule 144;

 

●

broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;

 

●

a combination of any such methods of sale; and

 

●

any other method permitted pursuant to applicable law.

 

If the selling stockholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling stockholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of common stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume. The selling stockholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

 

 

The selling stockholders may pledge or grant a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act, amending, if necessary, the list of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this prospectus. The selling stockholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling owners for purposes of this prospectus.

 

The selling stockholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be “underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

 

Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

 

There can be no assurance that any selling stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.

 

The selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholders and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

 

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

 

 

Experts

 

Cherry Bekaert LLP, our independent registered public accounting firm, has audited our consolidated financial statements for the yearsended December 31, 2022 and 2021, as set forth in their report, which is included in this prospectus and elsewhere in this registrationstatement. Our consolidated financial statements are included in this prospectus and in the registration statement in reliance on CherryBekaert LLP’s report, given on their authority as experts in accounting and auditing.

 

Legal Matters

 

Ellenoff Grossman & Schole LLP, New York, New York, is acting as counsel in connection with the registration of our securities under the Securities Act, and as such, will pass upon the validity of the securities offered hereby. Certain matters are being passed on for the placement agents by Blank Rome LLP, New York, New York.

 

Where You Can Find More Information

 

We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed with the registration statement. For further information about us and the common stock offered hereby, we refer you to the registration statement and the exhibits filed with the registration statement. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. The SEC also maintains an internet website that contains reports, proxy statements and other information about registrants, like us, that file electronically with the SEC. The address of that website is www.sec.gov.

 

We are required to file periodic reports, proxy statements, and other information with the SEC pursuant to the Exchange Act. These reports, proxy statements, and other information will be available on the website of the SEC referred to above.

 

We also maintain a website at www.lucyd.co, through which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on or accessed through our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.

 

 

INDEX TO FINANCIAL STATEMENTS

 

		Page
Audited Financial Statements
Report of Independent Registered Public Accounting Firm		F-2
Balance Sheets as of December 31, 2022 and 2021		F-3
Statements of Operations for the year ended December 31, 2022 and December 31, 2021		F-4
Statements of Stockholders’ (Deficit) for the year ended December 31, 2022 and December 31, 2021		F-5
Statements of Cash Flows for the year ended December 31, 2022 and December 31, 2021		F-6
Notes to Financial Statements		F-7
Unaudited Financial Statements
Condensed Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022		F-18
Condensed Statements of Operations for the three months ended March 31, 2023 and 2022 (Unaudited)		F-19
Condensed Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (Unaudited)		F-20
Condensed Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (Unaudited)		F-21
Notes to the Financial Statements (Unaudited)		F-22

 

 

Reportof Independent Registered Public Accounting Firm

 

Tothe Board of Directors and Stockholders

InnovativeEyewear, Inc.

Miami,Florida

 

Opinionon the Financial Statements

 

Wehave audited the accompanying balance sheets of Innovative Eyewear, Inc. (the “Company”) as of December 31, 2022 and 2021,and the related statements of operations, changes in stockholders’ equity, and cash flows for the years then ended and the relatednotes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly,in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations andits cash flows for each of the years then ended, in conformity with accounting principles generally accepted in the United States ofAmerica.

 

Basisfor Opinion

 

Thesefinancial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federalsecurities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

Weconducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Companyis not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinionon the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Ouraudits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to erroror fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regardingthe amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significantestimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our auditsprovide a reasonable

basisfor our opinion.

 

Emphasisof Matter

 

Asmore fully described in Note 3 to the financial statements, the Company has incurred historical net losses and sustained substantialcash losses. Our opinion is not modified with respect to this matter.

 

Wehave served as the Company’s auditor since 2021.

 

/s/ Cherry Bekaert LLP

 

Tampa,Florida

March 24, 2023

 

 

INNOVATIVEEYEWEAR, INC.

BALANCESHEETS

December 31,2022 and 2021

 

		2022				2021
TOTAL ASSETS
Current Assets
Cash and cash equivalents		$	3,591,109			$	79,727
Accounts receivable, net of allowance of $92,646 and $0, respectively			110,258				43,394
Prepaid expenses			210,673				68,381
Deferred offering costs			-				111,149
Inventory prepayment			197,750				64,715
Inventory			94,701				275,501
Other current assets			36,240				1,460
Total Current Assets			4,240,731				644,327
Non-Current Assets
Patent costs, net			137,557				87,306
Capitalized software costs			110,073				72,400
Property and equipment, net			119,744				20,284
Other non-current assets			81,779				-
TOTAL ASSETS		$	4,689,884			$	824,317
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Current Liabilities
Accounts payable and accrued expenses		$	275,660			$	167,050
Deferred revenue			30,000				-
Due to Parent and Affiliates			232,989				160,722
Related party convertible debt			61,356				289,029
Total Current Liabilities			600,005				616,801
Non-Current Liabilities
Deferred revenue			65,450				-
TOTAL LIABILITIES			665,455				616,801
Commitments and contingencies			-				-
Stockholders’ Equity
Common stock (par value $0.00001, 50,000,000 shares authorized, and 7,307,157 and 6,060,187 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively)			73				60
Additional paid-in capital			14,330,343				4,842,836
Stock subscription receivable			-				(11,226	)
Accumulated deficit			(10,305,987	)			(4,624,154	)
TOTAL STOCKHOLDERS’ EQUITY			4,024,429				207,516
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	4,689,884			$	824,317

 

Seeaccompanying Notes to the Financial Statements.

 

 

INNOVATIVEEYEWEAR, INC.

STATEMENTSOF OPERATIONS

Forthe years ended December 31, 2022 and 2021

 

		Year Ended December 31,
		2022				2021
Revenues, net		$	659,788			$	690,670
Less: Cost of Goods Sold			(716,077	)			(542,416	)
Gross (Deficit) Profit			(56,289	)			148,254
Operating Expenses:
General and administrative			(2,796,669	)			(1,386,079	)
Sales and marketing			(2,059,012	)			(1,771,012	)
Research and development			(524,692	)			(86,261	)
Related party management fee			(140,000	)			(109,975	)
Total Operating Expenses			(5,520,373	)			(3,353,327	)
Interest Expense			(105,171	)			(39,433	)
Net Loss		$	(5,681,833	)		$	(3,244,506	)
Weighted average number of shares outstanding			6,528,959				5,245,622
Loss per share, basic and diluted		$	(0.87	)		$	(0.62	)

 

Seeaccompanying Notes to the Financial Statements.

 

 

INNOVATIVEEYEWEAR, INC.

STATEMENTSOF CHANGES IN STOCKHOLDERS’ EQUITY

Forthe years ended December 31, 2022 and 2021

 

		Common Stock								Additional Paid In				Stock Subscription				Accumulated				Total Stockholders’
		# Shares				Amount				Capital				Receivable				Deficit				Equity
Balances, January 1, 2022			6,060,187			$	60			$	4,842,836			$	(11,226	)		$	(4,624,154	)		$	207,516
Collection of stock subscription receivable			-				-								6,684				-				6,684
Write-off of uncollectible stock subscription receivable			-				-				(4,542	)			4,542				-				-
Shares issued for conversion of related party convertible note			266,970				3				2,002,277				-				-				2,002,280
Initial public offering (see Note 8)			980,000				10				6,015,908				-				-				6,015,918
Stock based compensation			-				-				1,473,864				-				-				1,473,864
Net loss			-				-				-				-				(5,681,833	)			(5,681,833	)
Balances, December 31, 2022			7,307,157			$	73			$	14,330,343			$	-			$	(10,305,987	)		$	4,024,429
Balances, January 1, 2021			4,131,469			$	41			$	845,417			$	(20,647	)		$	(1,379,648	)		$	(554,837	)
Shares issued for conversion of related party convertible note			1,172,115				12				2,179,760				-				-				2,179,772
Issuance of shares, net of offering costs of $351,411			756,603				7				482,724				(44,763	)			-				437,968
Collection of stock subscription receivable			-				-				-				54,184				-				54,184
Stock based compensation			-				-				1,334,935				-				-				1,334,935
Net loss			-				-				-				-				(3,244,506	)			(3,244,506	)
Balances, December 31, 2021			6,060,187			$	60			$	4,842,836			$	(11,226	)		$	(4,624,154	)		$	207,516

 

Seeaccompanying Notes to the Financial Statements.

 

 

INNOVATIVEEYEWEAR, INC.

STATEMENTSOF CASH FLOWS

Forthe years ended December 31, 2022 and 2021

 

		2022				2021
Operating Activities
Net Loss		$	(5,681,833	)		$	(3,244,506	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization			10,466				7,179
Depreciation			22,101				498
Non cash interest expense			105,171				1,251
Stock based compensation expense			1,473,864				1,334,935
Expenses paid by parent and affiliates			960,362				867,618
Provision for doubtful accounts			116,230				-
Changes in operating assets and liabilities:
Accounts receivable			(183,094	)			(43,394	)
Accounts payable and accrued expenses			67,951				157,536
Prepaid expenses			(142,292	)			(43,381	)
Inventory			47,765				(250,436	)
Other current assets			1,460				(1,460	)
Contract assets and liabilities			(22,569	)			-
Net cash flows from operating activities			(3,224,418	)			(1,214,160	)
Investing Activities
Patent costs			(60,717	)			(25,272	)
Purchases of property and equipment			(121,561	)			(20,782	)
Capitalized software expenditures			(37,673	)			(72,400	)
Net cash flows from investing activities			(219,951	)			(118,454	)
Financing Activities
Proceeds from initial public offering (see Note 8)			6,127,067				-
Proceeds from issuance of shares, net of offering costs			-				492,152
Payment of deferred offering cost			-				(111,149	)
Collection of stock subscription receivable			6,684				-
Proceeds from related party convertible debt			1,475,000				1,061,500
Repayment of related party convertible debt			(653,000	)			(57,185	)
Net cash flows from financing activities			6,955,751				1,385,318
Net Change In Cash			3,511,382				52,704
Cash at Beginning of Year		$	79,727			$	27,023
Cash at End of Year		$	3,591,109			$	79,727
Significant Non-Cash Transaction
Expenses paid for by Parent reported as increase in Due to Parent and Affiliates and related party convertible debt			960,362				867,618
Write-off of uncollectible stock subscription receivable			(4,542	)			-
Issuance of shares from conversion of related party convertible debt			2,002,280				2,179,772

 

Seeaccompanying Notes to the Financial Statements.

 

 

INNOVATIVEEYEWEAR, INC.

NOTESTO THE FINANCIAL STATEMENTS

December 31,2022 and 2021

 

NOTE1 – GENERAL INFORMATION

 

InnovativeEyewear, Inc. (the “Company,” “us,” “we,” or “our”) is a corporation organized underthe laws of the State of Florida that develops and sells cutting-edge eyeglasses and sunglasses, which are designed to allow our customersto remain connected to their digital lives, while also offering prescription eyewear and sun protection. The Company was founded by LucydLtd. (the “Parent” or “Lucyd”), a portfolio company of Tekcapital Plc through Tekcapital Europe, Ltd. (collectively,the “Parent and Affiliates”), which owned approximately 71% of our issued and outstanding shares of common stock as of December 31,2022. Innovative Eyewear licensed the exclusive rights to the Lucyd^® brand from Lucyd Ltd., which includes the exclusiveuse of all of Lucyd’s intellectual property, including our main product, Lucyd Lyte^® glasses.

 

NOTE2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basisof Presentation

 

Theaccompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States(“GAAP”) and in accordance with the accounting rules under Regulation S-X, as promulgated by the Securities and ExchangeCommission (“SEC”). In the opinion of management, all adjustments considered necessary for the fair presentation of the financialstatements for the years presented have been included. The results of operations for the years ended December 31, 2022 and 2021are not necessarily indicative of the results to be expected for future periods.

 

Useof Estimates

 

Thepreparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and thereported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, particularlygiven the significant economic disruptions and uncertainties associated with the ongoing economic environment, including potential supplychain constraints.

 

Receivablesand Credit Policy

 

Tradereceivables from customers are uncollateralized customer obligations due under normal trade terms. For direct-to-consumer sales, paymentis required before product is shipped. Trade receivables are stated at the amount billed to the customer. Payments of trade receivablesare allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliestunpaid invoice. The Company, by policy, routinely assesses the financial strength of its customers. To comply with industry standards,we offer “net 30” payments on wholesale orders of $1,500 or more. For wholesale orders, to acquire an order on net 30 terms,the customer is provided a credit check application as well as a credit card authorization form. The authorization form explicitly stateswhen and for much we will bill the customer via credit card.

 

Accountsreceivable are reported net of the allowance for doubtful accounts. The allowance for doubtful accounts is based on the Company’sevaluation of each customer’s payment history, account aging, and financial position. The Company recognized bad debt expense of$116,230 forthe year ended December 31, 2022, and nobad debt expense for the year ended December 31,2021.

 

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CapitalizedSoftware

 

TheCompany incurred software development costs related to development of the Vyrb app. The Company capitalized these costs in accordancewith ASC 985-20, “Software – Costs of Software to be Sold, Leased, or Marketed,” considering it is the Company’sintention to market and sell the software externally. Planning, designing, coding, and testing occurred necessary to meet Vyrb’sdesign specifications. As such, all coding, development, and testing costs incurred subsequent to establishing technical feasibilitywere capitalized. We have launched a beta version of the Vyrb application in December 2021 that demonstrates the functionality ofthe software. We expect an estimated useful life of five years for this product.

 

Inventory

 

Ourinventory includes purchased eyewear and is stated at the lower of cost or net realizable value, with cost determined on a specific identificationmethod of inventory costing which attaches the actual cost to an identifiable unit of product. Provisions for excess, obsolete, or slow-movinginventory are recorded after periodic evaluation of historical sales, current economic trends, forecasted sales, estimated product lifecycles, and estimated inventory levels. No provisions were determined as needed as of December 31, 2022 and 2021.

 

Asof December 31, 2022 and 2021, the Company recorded an inventory prepayment in the amount of $197,750and $64,715,respectively, related to down payment on eyewear purchased from the manufacturer, prior to shipment of the product that occurred afterDecember 31, 2022 and 2021, respectively.

 

IntangibleAssets

 

Intangibleassets relate to patent costs received in conjunction with the initial capitalization of the Company and internally developed utilityand design patents. The Company amortizes these assets over the estimated useful life of the patents. The Company reviews its intangibleassets for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

 

Propertyand Equipment

 

Propertyand equipment are depreciated using the straight-line method over the estimated useful lives or lease terms if shorter. Depreciationexpense for the years ended December 31, 2022 and 2021 was approximately $22,100and $500,respectively. For income tax purposes, accelerated depreciation methods are generally used. Repair and maintenance costs are expensedas incurred.

 

Schedule of estimated useful lives of property and equipment
		As of December 31,								Estimated Useful Lives
Property & Equipment		2022				2021				(in Years)
Mobile Kiosk Display		$	63,395			$	18,120			3 years
Computer Equipment			44,901				2,662			3 Years
Office Equipment			17,273				-			3 Years
Internal-Use Software			16,775				-			3 to 5 Years
Property and equipment, gross			142,343				20,782
Less: Accumulated depreciation			(22,599	)			(498	)
Property and equipment, net		$	119,744			$	20,284

 

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IncomeTaxes

 

TheCompany accounts for income taxes under an asset and liability approach that recognizes deferred tax assets and liabilities based onthe difference between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates ineffect in the years in which the differences are expected to reverse.

 

TheCompany follows a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expectedto be taken, in a tax return. Any interest and penalties accrued related to uncertain tax positions are recorded in tax expense.

 

TheCompany assesses the realizability of its net deferred tax assets on an annual basis. If, after considering all relevant positive andnegative evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized, the Companywill reduce the net deferred tax assets by a valuation allowance. The realization of net deferred tax assets is dependent on severalfactors, including the generation of sufficient taxable income prior to the expiration of net operating loss carryforwards.

 

FairValue of Financial Instruments

 

Forcertain of the Company’s financial instruments, including cash, accounts receivable, accounts payable, and cash advances providedby the Parent and Affiliates, the carrying amounts approximate fair value due to the short-term maturities of these instruments. Thecarrying value of the convertible note approximates fair value because the interest rate approximates market rates.

 

Concentrationsof Credit Risk

 

Financialinstruments that potentially subject the Company to concentrations of credit risk consist principally of cash and accounts receivable.The Company limits its credit risk with respect to cash by maintaining cash balances with high quality financial institutions. At times,the Company’s cash balances may exceed federally insured limits. Concentrations of credit risk with respect to accounts receivableare considered minimal due to collection history.

 

Stock-BasedCompensation

 

TheCompany accounts for stock-based compensation to employees and directors in accordance with FASB ASC Topic 718, which requires that compensationexpense be recognized in the financial statements for stock-based awards based on the grant date fair value. For stock option awards,the Black-Scholes-Merton option pricing model was used to estimate the fair value of share-based awards. The Black-Scholes-Merton optionpricing model incorporates various and highly subjective assumptions, including expected term and share price volatility. The expectedterm of the stock options was estimated based on the simplified method as allowed by Staff Accounting Bulletin 107 (SAB 107).

 

Theshare price volatility at the grant date is estimated using historical stock prices based upon the expected term of the options granted,using stock prices of comparably profiled public companies. The risk-free interest rate assumption is determined using the rates forU.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

 

Thefair value of common stock used in the option pricing model for stock-based awards granted in 2021 was determined using the most recentprice paid by independent investors through a Regulation Crowdfunding (“CF”) securities offering undertaken by the Company.For the majority of time during which stock option awards were granted by the Company in 2021, the Company had been raising funds frominvestors under Regulation CF campaigns, with a significant number of transactions from both accredited and non-accredited investors.

 

RevenueRecognition

 

Ourrevenue is generated from the sales of prescription and non-prescription optical glasses, sunglasses, and shipping charges, which arecharged to the customer, associated with these purchases. We sell products through our retail store resellers, distributors, on our ownwebsite Lucyd.co, and on Amazon.

 

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Todetermine revenue recognition, we perform the following steps: (i) identify the contract(s) with a customer, (ii) identify the performanceobligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligationsin the contract, and (v) recognize revenue when (or as) we satisfy a performance obligation. At contract inception, we assess the goodsor services promised within each contract and determine those that are performance obligations, and also assess whether each promisedgood or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performanceobligation when (or as) the performance obligation is satisfied. In instances where the collectibility of contractual consideration isnot probable at the time of sale, the revenue is deferred on our balance sheet as a contract liability, and the associated cost of goodssold is deferred on our balance sheet as a contract asset; subsequently, we recognize such revenue and cost of goods sold as paymentsare received.

 

Allrevenue, including sales processed online and through our retail store resellers and distributors, is reported net of sales taxes collectedfrom customers on behalf of taxing authorities, returns, and discounts.

 

Forsales generated through our e-commerce channels, we identify the contract with a customer upon online purchase of our eyewear and transactionprice at the manufacturer suggested retail price (“MSRP”) for non-prescription, polarized sunglass and blue light blockingglasses across all of our online channels. Our e-commerce revenue is recognized upon meeting of the performance obligation when the eyewearis shipped to end customers. Only U.S. consumers enjoy free USPS first class postage, with faster delivery options available for extracost, for sales processed through our website and on Amazon. For Amazon sales, shipping is free for U.S consumers while internationalcustomers pay shipping charges on top of MSRP. Any costs associated with fees charged by the online platforms (Shopify for Lucyd.co websiteand Amazon) are not recharged to customers and are recorded as a component of cost of goods sold as incurred. The Company charges applicablestate sales taxes in addition to the MSRP for both online channels and all other marketplaces on which the company sells products.

 

Forsales to our retail store partners, we identify the contract with a customer upon receipt of an order of our eyewear through our Shopifywholesale portal or direct purchase order. Our revenue is recognized upon meeting the performance obligation, which is delivery of theCompany’s eyewear products to the retail store and is also recorded net of returns and discounts. Our wholesale pricing for eyewearsold to the retail store partners includes volume discounts, due to the nature of large quantity orders. The pricing includes shippingcharges, while excluding any state sales tax charges applicable. Due to the nature of wholesale retail orders, no e-commerce fees areapplicable.

 

Forsales to distributors, we identify the contract with a customer upon receipt of an order of our eyewear through a direct purchase orderand after collectibility of substantially all of the contract consideration is probable. Our revenue is recognized upon meeting the performanceobligation, which is delivery of our eyewear products to the distributor and is also recorded net of returns and discounts. Our wholesalepricing for eyewear sold to distributors includes volume discounts, due to the nature of large quantity orders. The pricing includesshipping charges, while excluding any state sales tax charges applicable. Due to the nature of wholesale distributor orders, no e-commercefees are applicable.

 

TheCompany’s sales do not contain any variable consideration.

 

Weallow our customers to return our products, subject to our refund policy, which allows any customer to return our products for any reasonwithin the first:

 

●

7 days for sales made through our website (Lucyd.co)

 

●

30 days for sales made through Amazon

 

●

30 days for sales to most wholesale retailers and distributors (although certain sales to independent distributors are ineligible for returns)

 

Forall of our sales, at the time of sale, we establish a reserve for returns, based on historical experience and expected future returns,which is recorded as a reduction of sales. Additionally, we review all individual returns received in the month following the balancesheet date pertaining to orders processed prior to the balance sheet date in order to determine whether an allowance for sales returnsis necessary. The Company recorded an allowance for sales returns of $24,897and $22,266as of December 31, 2022 and 2021, respectively.

 

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Shippingand Handling

 

Costsincurred for shipping and handling are included in cost of revenue at the time the related revenue is recognized. Amounts billed to acustomer for shipping and handling are reported as revenues.

 

RecentAccounting Pronouncements

 

InFebruary 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)No. 2016-02, “Leases (Topic 842),” that requires organizations that lease assets, referred to as “lessees,” torecognize on the balance sheet the assets and liabilities for the rights and obligations created by those leases with lease terms ofmore than 12 months. ASU 2016-02 also requires disclosures to help investors and other financial statement users better understand theamount, timing, and uncertainty of cash flows arising from leases and will include qualitative and quantitative requirements. The Companyadopted ASU 2016-02 as of January 1, 2021. The Company’s management determined that the adoption of this guidance had no materialimpact on the Company’s financial statements due to the lack of long-term leasing arrangements.

 

InMay 2018, the FASB issued ASU 2020-06, “Debt — Debt with Conversion and Other Options (Subtopic 470-20), and Derivativesand Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contract’sin Entity’s Own Equity.” The guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertiblepreferred stock by removing the previous guidance related to debt with conversion and other options that required entities to accountfor beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock.In addition, the amendments revised the scope exception from derivative accounting in ASC 815-40 for freestanding financial instrumentsand embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removingcertain criteria required for equity classification. The amendments in ASU 2020-06 further revised the guidance in ASC 260, EarningsPer Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method.The Company adopted ASU 2020-06 as of January 1, 2021. The Company’s management determined that the adoption of this guidancehad no material impact on the Company’s financial statements due to the lack of beneficial conversion features contained withinthe Company’s debt.

 

SubsequentEvents

 

Inconnection with the preparation of these financial statements, the Company has evaluated subsequent events through March 24, 2023,which is the date the financial statements were available to be issued.

 

NOTE3 – GOING CONCERN

 

TheCompany has a limited operating history. The Company’s business and operations are sensitive to general business and economic conditionsin the United States. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditionsmay include recession, downturn, or otherwise, changes in regulations or restrictions in imports, competition, or changes in consumertaste including the economic impacts from the COVID-19 pandemic. These adverse conditions could affect the Company’s financialcondition and the results of its operations.

 

TheCompany meets its day to day working capital requirements through monies raised through sales of eyewear and issuances of equity, includingpast crowdfunding transactions, and more recently an initial public offering completed in August 2022. The Company also has issueda convertible note held by its parent company. The Company’s forecasts and projections indicate that the Company expects to havesufficient cash reserves and future income to operate within the level of its current facilities. The Company anticipates that its availableliquidity will be sufficient to fund operations through at least the end of March 2024.

 

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NOTE4 – INCOME TAX PROVISION

 

Thefollowing is a reconciliation of tax computed at the statutory federal rate to the income tax benefit in the statements of operations:

 

Schedule of reconciliation of federal statutory tax rate
		2022				2021
Income tax benefit at the statutory federal rate		$	1,193,185			$	681,346
State income tax benefits, net of federal benefit			35,149				110,647
Change in valuation allowance			(1,228,334	)			(791,993	)
Total		$	-				-

 

Thecomponents of the Company’s deferred tax assets are as follows:

 

Schedule of deferred tax assets
		2022				2021
Deferred tax assets:
Stock-based compensation		$	610,530			$	359,032
Other – net			122,133				6,757
Net operating losses – federal			1,346,823				534,771
Net operating losses – state			81,911				110,647
Deferred tax assets Gross	Deferred tax assets, Gross			2,161,397				1,011,207
Less Valuation Allowance			(2,161,397	)			(1,011,207	)
Net deferred tax assets		$	-			$	-

 

Deferredtax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities.Deferred tax assets or liabilities at the end of each period are determined using the tax rate expected to be in effect when taxes areactually paid or recovered.

 

Avaluation allowance is established when it is more likely than not that all or a portion of a deferred tax asset will not be realized.A review of all available positive and negative evidence needs to be considered, including a company’s current and past performance,the market environment in which the company operates, length of carryback and carryforward periods, and existing contracts that willresult in future profits. After reviewing all the evidence, the Company has recorded a full valuation allowance against its deferredtax assets.

 

AtDecember 31, 2022, the Company had federal net operating loss carryforwards of $6,413,441and state net operating loss carryforwards of$3,653,332,both of which do not expire.

 

TheCompany files Federal and Florida tax returns. The years that remain subject to examination are the years ended December 31, 2020,2021, and 2022. As of December 31, 2022 and 2021, the Company does notbelieve that is has any liabilities for uncertain tax positions.

 

NOTE5 – INTANGIBLE ASSETS

 

Schedule of intangible assets
		December 31,				December 31,
Finite-lived intangible assets		2022				2021
Patent Costs		$	156,196			$	95,480
Intangible assets, gross			156,196				95,480
Less: Accumulated amortization			(18,639	)			(8,174	)
Intangible assets, net		$	137,557			$	87,306

 

Amortizationexpense totalled approximately $10,500and $7,200for the years ended December 31, 2022 and2021, respectively. Future amortization is expected to approximate $11,500per year.

 

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NOTE6 – RELATED PARTY TRANSACTIONS

 

ConvertibleNote and Due to Parent and Affiliates

 

Duringthe years ended December 31, 2022 and 2021, the Company had the availability of, but not the contractual right to, intercompanyfinancing from the Parent and Affiliates in the form of either cash advances or borrowings under a convertible note (as discussed below).The convertible notes balances were $61,356 and$289,029 asof December 31, 2022 and 2021, respectively.

 

OnDecember 1, 2020, the Company issued a convertible note to its Parent and Affiliates for up to $2,000,000that bears interest at 10%per annum, which includes the option to convert the debt into the Company’s common stock at market price. The note can be convertedinto shares of common stock of the Company upon occurrence of certain conversion events, as defined.

 

OnJune 1, 2021, the Company converted related party borrowings totalling $778,500into 778,500shares of common stock at $1.00each.

 

OnSeptember 5, 2021, the Company converted related party borrowings totalling $500,002into 140,449shares of common stock at $3.56each.

 

OnNovember 1, 2021, the Company amended and restated its December 1, 2020, convertible note agreement with Parent and Affiliates,increasing the amount of available financing from $2,000,000 to $3,000,000.

 

OnNovember 16, 2021, the Company converted related party borrowings totalling $901,271into 253,166shares of common stock at $3.56per share.

 

OnAugust 15, 2022, in connection with the Company’s initial public offering (see Note 8), the Company converted related partyborrowings totalling $2,002,280into 266,970shares of common stock at $7.50per share.

 

ManagementService Agreement

 

In2020, the Company entered into a management services agreement with a related party (related through common ownership), for which theCompany was billed $25,000 quarterly. Effective February 1, 2022, the original management services agreement was amended to havethe Company billed at $35,000 quarterly. While the agreement does not stipulate a specific maturity date, it can be terminated with 30calendar days written notice by any party.

 

Therelated party provides the following services:

 

●

Support and advice to the Company in accordance with their area of expertise;

 

●

Research, technical review, legal review, recruitment, software development, marketing, public relations, and advertisement; and

 

●

Advice, assistance, and consultation services to support the Company or in relation to any other related matter.

 

Duringthe years ended December 31, 2022 and 2021, the Company incurred $140,000and $100,000,respectively, under its management services agreement with Tekcapital Europe Ltd.

 

Rentof Office Space

 

Priorto the February 1, 2022 amendment of the aforementioned management services agreement, the Company was provided with rent-free officespace by the Parent and Affiliates. Effective February 1, 2022, Tekcapital began to bill the Company for an allocation of rent paidby Tekcapital on the Company’s behalf. The Company recognized $74,442of expense related to this arrangement for theyear ended December 31, 2022.

 

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NOTE7 – COMMITMENTS AND CONTINGENCIES

 

LegalMatters

 

Weare not the subject of any material pending legal proceedings, however, may from time to time become a party to various legal proceedingsarising in the ordinary course of business.

 

Leases

 

Ourexecutive offices are located at 11900 Biscayne Blvd., Suite 630 Miami, Florida 33181. Our executive offices are provided to us by theparent of our majority stockholder, Tekcapital (see Note 6). We consider our current office space adequate for our current operations.

 

LicenseAgreements

 

During the year ended December 31, 2022, the Company entered into multi-year license agreements which grant the Company the right to sellcertain branded smart eyewear. These agreements require the Company to pay royalties based on a percentage of net retail and wholesalesales during the period of the license, and also require guaranteed minimum royalty payments.

 

Theaggregate future minimum payments due under these license agreements are as follows:

 

Schedule of future minimum payments due
2023		$	36,750
2024			161,210
2025			356,000
2026			654,000
2027			930,000
Thereafter (through 2032)			7,200,000
Total		$	9,337,960

 

OtherCommitments

 

Seerelated party management services agreement discussed in Note 6.

 

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NOTE8 – STOCKHOLDERS’ EQUITY

 

Pursuantto a corporate resolution on July 1, 2021, the Company has authority to issue up to 15,000,000shares of preferred stock and 50,000,000shares of common stock. There were noshares of preferred stock issued or outstandingas of December 31, 2022 and 2021.

 

InitialPublic Offering

 

OnAugust 17, 2022, the Company closed on its initial public offering of 980,000units consisting of 980,000shares of its common stock and 1,960,000warrants to purchase 1,960,000 shares of commonstock at a combined offering price of $7.50per unit in exchange for gross proceeds of approximately$7.35million, before deducting underwriting discountsand offering expenses. Each share of common stock was sold together with two warrants. Each warrant is exercisable to purchase one shareof common stock at an initial exercise price of $7.50 per share, subject to certain adjustments as set forth in the warrant agreement.In addition, the Companygranted the underwriters a 45-day option to purchase up to an additional 147,000 shares of common stock and/or warrants to purchase upto an additional 294,000 shares of common stock to cover over-allotments, of which the Underwriter exercised its option to purchase additionalwarrants to purchase 294,000 shares of common stock concurrently with the closing.

 

Theshares of common stock and warrants began trading on The Nasdaq Capital Market on August 15, 2022, under the symbols “LUCY”and “LUCYW,” respectively.

 

Also,pursuant to the terms of the underwriting agreement for the offering, the Company issued by the Underwriter certain other warrants topurchase up to 58,800shares of the Company’s common stock atan exercise price of $8.228per share.

 

Thenet proceeds received by the Company amounted to $6,189,734.

 

Asof December 31, 2022, none of the aforementioned warrants had been exercised.

 

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NOTE9 – STOCK BASED COMPENSATION

 

OnJuly 1, 2021, an Equity Incentive Plan was approved, allowing for total of 20% of our issued and outstanding common stock immediatelyafter the consummation of the initial public offering, less the number of outstanding option grants, or 1,124,043,of total issued shares to be available for the grant of awards under the Plan. 1,685,000 option awards were granted by the Company priorto the approval of the Plan, while 647,500 option awards were granted subject to the Plan.

 

Duringthe year ended December 31, 2021, the Company, granted 1,687,500option awards, of which 1,347,500 vest rateablyover time and 340,000 vest based on certain performance conditions. There were nooption awards granted during the year ended December 31,2022.

 

Thefair value of options granted is calculated using the Black-Scholes-Merton option pricing model. The underlying assumptions used in theoption pricing model for stock option awards granted in 2021 were as follows:

 

Schedule fair value of options granted
Attribute
Share price at date of grant		$1.00 - $5.00
Options life in years		2 - 3
Risk free rate		0.16% - 0.44%
Expected volatility		121% - 151%
Expected dividend yield		0
Grant date fair value of options		$0.71 - $3.46

 

Theweighted average grant date fair value of options outstanding as of December 31, 2022 and 2021 was $1.84.

 

Detailsof the number of share options and the weighted average exercise price outstanding as of and during the years ended December 31,2022 and 2021 are as follows:

 

Schedule of number of share options and the weighted average exercise price outstanding
		Av. Exercise
		price per share				Options
		$				(Number)
As at January 1, 2021			1.00				645,000
Granted			3.23				1,687,500
Exercised			-				-
Forfeited			-				-
As at December 31, 2021			2.61				2,332,500
Exercisable as at December 31, 2021			1.87				395,269
As at January 1, 2022			2.61				2,332,500
Granted			-				-
Exercised			-				-
Forfeited			-				-
As at December 31, 2022			2.61				2,332,500
Exercisable as at December 31, 2022			2.18				1,198,577

 

Asof December 31, 2022, the weighted average remaining contractual life of options was 1.68years for outstanding options, and 1.79years for exercisable options.

 

Asof December 31, 2022, unrecognized stock option expense of $1,409,958remains to be recognized over next 1.41years.

 

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NOTE10 – EARNINGS PER SHARE

 

TheCompany calculates earnings/(loss) per share data by calculating the quotient of earnings/(loss) divided by the weighted average numberof common shares outstanding during the respective period as required by ASC 260-10-50. Due to the net losses for the years ended December 31,2022 and 2021, all shares underlying the related party convertible debt, common stock warrants, and common stock options were excludedfrom the earnings per share calculation due to their anti-dilutive effect.

 

Calculationof net earnings per common share — basic and diluted:

 

Calculation of net earnings per common share - basic and diluted
		For the year ended
		December 31, 2022				December 31, 2021
Basic and diluted:
Net loss			(5,681,833	)			(3,244,506	)
Weighted-average number of common shares			6,528,959				5,245,622
Basic and diluted net loss per common share		$	(0.87	)		$	(0.62	)

 

NOTE11 – SUBSEQUENT EVENTS

 

InFebruary 2023, holders of the Company’s warrants (see Note 8) exercised warrants to purchase an aggregate of 408,600shares of the Company’s common stock, atan adjusted exercise price of $3.75per share, resulting in cash proceeds to theCompany of $1,532,250.

 

 

INNOVATIVEEYEWEAR, INC.

CONDENSEDBALANCE SHEETS

March 31, 2023 (Unaudited) and December 31, 2022

 

		2023				2022
TOTAL ASSETS
Current Assets
Cash and cash equivalents		$	3,449,828			$	3,591,109
Accounts receivable, net of allowance of $92,646			127,642				110,258
Prepaid expenses			185,313				210,673
Inventory prepayment			-				197,750
Inventory			743,084				94,701
Other current assets			36,240				36,240
Total Current Assets			4,542,107				4,240,731
Non-Current Assets
Patent costs, net			240,426				137,557
Capitalized software costs			110,073				110,073
Property and equipment, net			137,572				119,744
Other non-current assets			82,719				81,779
TOTAL ASSETS		$	5,112,897			$	4,689,884
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities
Current Liabilities
Accounts payable and accrued expenses		$	292,226			$	275,660
Deferred revenue			30,000				30,000
Due to Parent and Affiliates			182,421				232,989
Related party convertible debt			-				61,356
Total Current Liabilities			504,647				600,005
Non-Current Liabilities
Deferred revenue			57,950				65,450
TOTAL LIABILITIES			562,597				665,455
Commitments and contingencies			-				-
Stockholders’ Equity
Common stock (par value $0.00001, 50,000,000 shares authorized, and 7,715,757 and 7,307,157 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively)			77				73
Additional paid-in capital			16,287,020				14,330,343
Accumulated deficit			(11,736,797	)			(10,305,987	)
TOTAL STOCKHOLDERS’ EQUITY			4,550,300				4,024,429
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY		$	5,112,897			$	4,689,884

 

See accompanying Notes to the Financial Statements.

 

 

INNOVATIVEEYEWEAR, INC.

CONDENSEDSTATEMENTS OF OPERATIONS

Forthe three months ended March 31, 2023 and 2022

(Unaudited)

 

		Three Months Ended March 31,
		2023				2022
Revenues, net		$	144,921			$	236,022
Less: Cost of Goods Sold			(134,630	)			(161,632	)
Gross Profit			10,291				74,390
Operating Expenses:
General and administrative			(993,772	)			(606,972	)
Sales and marketing			(259,297	)			(584,796	)
Research and development			(151,169	)			(35,807	)
Related party management fee			(35,000	)			(35,000	)
Total Operating Expenses			(1,439,238	)			(1,262,575	)
Other Income (Expense)			76				(499	)
Interest Expense			(1,939	)			(17,875	)
Total Other Expense			(1,863	)			(18,374	)
Net Loss		$	(1,430,810	)		$	(1,206,559	)
Weighted average number of shares outstanding			7,569,115				6,060,187
Loss per share, basic and diluted		$	(0.19	)		$	(0.20	)

 

See accompanying Notes to the Financial Statements.

 

 

INNOVATIVEEYEWEAR, INC.

CONDENSEDSTATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

Forthe three months ended March 31, 2023 and 2022

(Unaudited)

 

		Common Stock								Additional Paid In				Stock Subscription				Accumulated				Total Stockholders’ Equity
		# Shares				Amount				Capital				Receivable				Deficit				(Deficit)
Balances, January 1, 2023			7,307,157			$	73			$	14,330,343			$	-			$	(10,305,987	)		$	4,024,429
Stock based compensation			-				-				424,431				-				-				424,431
Exercise of warrants by stockholders			408,600				4				1,532,246				-				-				1,532,250
Net loss			-				-				-				-				(1,430,810	)			(1,430,810	)
Balances, March 31, 2023			7,715,757			$	77			$	16,287,020			$	-			$	(11,736,797	)		$	4,550,300
Balances, January 1, 2022			6,060,187			$	60			$	4,842,836			$	(11,226	)		$	(4,624,154	)		$	207,516
Stock based compensation			-				-				416,951				-				-				416,951
Net loss			-				-				-				-				(1,206,559	)			(1,206,559	)
Balances, March 31, 2022			6,060,187			$	60			$	5,259,787			$	(11,226	)		$	(5,830,713	)		$	(582,092	)

 

See accompanying Notes to the Financial Statements.

 

 

INNOVATIVEEYEWEAR, INC.

CONDENSEDSTATEMENTS OF CASH FLOWS

Forthe three months ended March 31, 2023 and 2022

(Unaudited)

 

		2023				2022
Operating Activities
Net Loss		$	(1,430,810	)		$	(1,206,559	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization			5,956				1,739
Depreciation			10,307				3,983
Non cash interest expense			1,939				17,875
Stock based compensation expense			424,431				416,951
Expenses paid by parent and affiliates			62,204				235,719
Provision for doubtful accounts			142				-
Changes in operating assets and liabilities:
Accounts receivable			(17,526	)			(110,329	)
Accounts payable and accrued expenses			14,627				38,042
Prepaid expenses			25,360				13,114
Inventory			(450,633	)			(41,404	)
Other current assets			(10,000	)			-
Other current liabilities			(64,629	)			-
Contract assets and liabilities			1,560				-
Net cash flows from operating activities			(1,427,072	)			(630,869	)
Investing Activities
Patent costs			(108,825	)			(31,744	)
Purchases of property and equipment			(28,135	)			(32,106	)
Capitalized software expenditures			-				(18,811	)
Net cash flows from investing activities			(136,960	)			(82,661	)
Financing Activities
Payment of deferred offering cost			-				(59,446	)
Proceeds from exercise of warrants by stockholders			1,532,250				-
Proceeds from related party convertible debt			-				735,000
Repayment of related party convertible debt			(109,499	)			-
Net cash flows from financing activities			1,422,751				675,554
Net Change In Cash			(141,281	)			(37,976	)
Cash at Beginning of Period		$	3,591,109			$	79,727
Cash at End of Period		$	3,449,828			$	41,751
Significant Non-Cash Transactions
Expenses paid for by Parent reported as increase in Due to Parent and Affiliates and related party convertible debt			62,204				235,719

 

See accompanying Notes to the Financial Statements.

 

 

INNOVATIVEEYEWEAR, INC.

NOTESTO THE FINANCIAL STATEMENTS

March 31, 2023 and 2022 (Unaudited)

 

NOTE 1 – GENERAL INFORMATION

 

Innovative Eyewear, Inc. (the “Company,” “us,” “we,” or “our”) is a corporation organized under the laws of the State of Florida that develops and sells cutting-edge eyeglasses and sunglasses, which are designed to allow our customers to remain connected to their digital lives, while also offering prescription eyewear and sun protection. The Company was founded by Lucyd Ltd. (the “Parent” or “Lucyd”), a portfolio company of Tekcapital Plc through Tekcapital Europe, Ltd. (collectively, the “Parent and Affiliates”), which owned approximately 67% of our issued and outstanding shares of common stock as of March 31, 2023. Innovative Eyewear licensed the exclusive rights to the Lucyd^® brand from Lucyd Ltd., which includes the exclusive use of all of Lucyd’s intellectual property, including our main product, Lucyd Lyte^® glasses.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The accompanying condensed balance sheet as of December 31, 2022 (which has been derived from audited financial statements) and the unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows.

 

In the opinion of management, all adjustments considered necessary for the fair presentation of the financial statements for the periods presented have been included. The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for future periods or the full year.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, particularly given the significant economic disruptions and uncertainties associated with the ongoing economic environment, including potential supply chain constraints.

 

Receivables and Credit Policy

 

Trade receivables from customers are uncollateralized customer obligations due under normal trade terms. For direct-to-consumer sales, payment is required before product is shipped. Trade receivables are stated at the amount billed to the customer. Payments of trade receivables are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the earliest unpaid invoice. The Company, by policy, routinely assesses the financial strength of its customers. To comply with industry standards, we offer “net 30” payments on wholesale orders of $1,500 or more. For wholesale orders, to acquire an order on net 30 terms, the customer is provided a credit check application as well as a credit card authorization form. The authorization form explicitly states when and for much we will bill the customer via credit card.

 

Accounts receivable are reported net of the allowance for doubtful accounts. The allowance for doubtful accounts is based on the Company’s evaluation of each customer’s payment history, account aging, and financial position. The Company recognized bad debt expense of $142 for the three months ended March 31, 2023, and had an allowance for doubtful accounts of $92,646 as of March 31, 2023.

 

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Capitalized Software

 

The Company incurred software development costs related to development of the Vyrb app. The Company capitalized these costs in accordance with ASC 985-20, “Software – Costs of Software to be Sold, Leased, or Marketed,” considering it is the Company’s intention to market and sell the software externally. Planning, designing, coding, and testing occurred necessary to meet Vyrb’s design specifications. As such, all coding, development, and testing costs incurred subsequent to establishing technical feasibility were capitalized. We launched a beta version of the Vyrb application in December 2021 that demonstrates the functionality of the software. We are planning the commercial launch of Vyrb in the fourth quarter of 2023, and expect an estimated useful life of five years for this product.

 

Inventory

 

Our inventory includes purchased eyewear and is stated at the lower of cost or net realizable value, with cost determined on a specific identification method of inventory costing which attaches the actual cost to an identifiable unit of product. Provisions for excess, obsolete, or slow-moving inventory are recorded after periodic evaluation of historical sales, current economic trends, forecasted sales, estimated product life cycles, and estimated inventory levels. No provisions were determined as needed as of March 31, 2023 and as of December 31, 2022.

 

As of December 31, 2022, the Company recorded an inventory prepayment in the amount of $197,750, related to a down payment for eyewear purchased from the manufacturer; this product was shipped during the three months ended March 31, 2023, and there was no prepayment balance remaining as of March 31, 2023.

 

Intangible Assets

 

Intangible assets relate to patent costs received in conjunction with the initial capitalization of the Company and internally developed utility and design patents. The Company amortizes these assets over the estimated useful life of the patents. The Company reviews its intangibles assets for impairment whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable.

 

Property and Equipment

 

Property and equipment are depreciated using the straight-line method over the estimated useful lives or lease terms if shorter. Depreciation expense for the three months ended March 31, 2023 and 2022 was $10,307 and $3,983, respectively. For income tax purposes, accelerated depreciation methods are generally used. Repair and maintenance costs are expensed as incurred.

 

Income Taxes

 

The Company accounts for income taxes under an asset and liability approach that recognizes deferred tax assets and liabilities based on the difference between the financial statement carrying amounts and the tax bases of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.

 

The Company follows a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. Any interest and penalties accrued related to uncertain tax positions are recorded in tax expense.

 

The Company periodically assesses the realizability of its net deferred tax assets. If, after considering all relevant positive and negative evidence, it is more likely than not that some portion or all of the net deferred tax assets will not be realized, the Company will reduce the net deferred tax assets by a valuation allowance. The realization of net deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of net operating loss carryforwards.

 

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Stock-Based Compensation

 

The Company accounts for stock-based compensation to employees and directors in accordance with ASC Topic 718, which requires that compensation expense be recognized in the financial statements for stock-based awards based on the grant date fair value. For stock option awards, the Black-Scholes-Merton option pricing model is used to estimate the fair value of share-based awards. The Black-Scholes-Merton option pricing model incorporates various and highly subjective assumptions, including expected term and share price volatility.

 

The expected term of the stock options is estimated based on the simplified method as allowed by Staff Accounting Bulletin 107 (SAB 107). The share price volatility at the grant date is estimated using historical stock prices of comparably profiled public companies based upon the expected term of the award being valued. The risk-free interest rate assumption is determined using the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued.

 

Revenue Recognition

 

Our revenue is generated from the sales of prescription and non-prescription optical glasses, sunglasses, and shipping charges, which are charged to the customer, associated with these purchases. We sell products through our retail store resellers, distributors, on our own website Lucyd.co, and on Amazon.

 

To determine revenue recognition, we perform the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy a performance obligation. At contract inception, we assess the goods or services promised within each contract and determine those that are performance obligations, and also assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. In instances where the collectability of contractual consideration is not probable at the time of sale, the revenue is deferred on our balance sheet as a contract liability, and the associated cost of goods sold is deferred on our balance sheet as a contract asset; subsequently, we recognize such revenue and cost of goods sold as payments are received.

 

All revenue, including sales processed online and through our retail store resellers and distributors, is reported net of sales taxes collected from customers on behalf of taxing authorities, returns, and discounts.

 

For sales generated through our e-commerce channels, we identify the contract with a customer upon online purchase of our eyewear and transaction price at the manufacturer suggested retail price (“MSRP”) for non-prescription, polarized sunglass and blue light blocking glasses across all of our online channels. Our e-commerce revenue is recognized upon meeting the performance obligation when the eyewear is shipped to end customers. Only U.S. consumers enjoy free USPS first class postage, with faster delivery options available for extra cost, for sales processed through our website and on Amazon. For Amazon sales, shipping is free for U.S consumers while international customers pay shipping charges on top of MSRP. Any costs associated with fees charged by the online platforms (Shopify for Lucyd.co website and Amazon) are not recharged to customers and are recorded as a component of cost of goods sold as incurred. The Company charges applicable state sales taxes in addition to the MSRP for both online channels and all other marketplaces on which the company sells products.

 

For sales to our retail store partners, we identify the contract with a customer upon receipt of an order of our eyewear through our Shopify wholesale portal or direct purchase order. Revenue is recognized upon meeting the performance obligation, which is delivery of the Company’s eyewear products to the retail store and is also recorded net of returns and discounts. Our wholesale pricing for eyewear sold to the retail store partners includes volume discounts, due to the nature of large quantity orders. The pricing includes shipping charges, while excluding any state sales tax charges applicable. Due to the nature of wholesale retail orders, no e-commerce fees are applicable.

 

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For sales to distributors, we identify the contract with a customer upon receipt of an order of our eyewear through a direct purchase order. Revenue is recognized upon meeting the performance obligation, which is delivery of our eyewear products to the distributor and is also recorded net of returns and discounts. Our wholesale pricing for eyewear sold to distributors includes volume discounts, due to the nature of large quantity orders. The pricing includes shipping charges, while excluding any state sales tax charges applicable. Due to the nature of wholesale orders, no e-commerce fees are applicable.

 

The Company’s sales do not contain any variable consideration.

 

We allow our customers to return our products, subject to our refund policy, which allows any customer to return our products for any reason within the first:

 

●

7 days for sales made through our website (Lucyd.co)

 

●

30 days for sales made through Amazon

 

●

30 days for sales to most wholesale retailers and distributors (although certain sales to independent distributors are ineligible for returns)

 

For all of our sales, at the time of sale, we establish a reserve for returns, based on historical experience and expected future returns, which is recorded as a reduction of sales. Additionally, we reviewed all individual returns received in April 2023 pertaining to orders processed prior to March 31, 2023. As a result, the Company determined that an allowance for sales returns was necessary. The Company recorded an allowance for sales returns of $1,925 and $24,897 as of March 31, 2023 and December 31, 2022, respectively.

 

Shipping and Handling

 

Costs incurred for shipping and handling are included in cost of revenue at the time the related revenue is recognized. Amounts billed to a customer for shipping and handling are reported as revenues.

 

NOTE 3 – GOING CONCERN

 

The Company has a limited operating history. The Company’s business and operations are sensitive to general business and economic conditions in the United States. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn, or otherwise, changes in regulations or restrictions in imports, competition, or changes in consumer taste including the economic impacts from the COVID-19 pandemic. These adverse conditions could affect the Company’s financial condition and the results of its operations.

 

The Company meets its day to day working capital requirements through monies raised through sales of eyewear and issuances of equity, including the initial public offering completed on August 2022 and subsequent exercises of warrants by stockholders. The Company also previously issued a convertible note held by its parent company, which was repaid in full during the three months ended March 31, 2023. The Company’s forecasts and projections indicate that the Company expects to have sufficient cash reserves and future income to operate within the level of its current facilities. The Company anticipates that its available liquidity will be sufficient to fund operations through at least the end of May 2024.

 

NOTE 4 – INCOME TAX PROVISION

 

At the end of each interim reporting period, the Company estimates its effective tax rate expected to be applied for the full year. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods. The Company has not recorded a tax provision for the three months ended March 31, 2023 and 2022 as it maintains a full valuation allowance against its net deferred tax assets.

 

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NOTE 5 – INTANGIBLE ASSETS

 

Schedule of intangible assets		March 31,				December 31,
Finite-lived intangible assets		2023				2022
Patent Costs		$	265,022			$	156,196
Intangible assets, gross			265,022				156,196
Less: Accumulated amortization			(24,595	)			(18,639	)
Intangible assets, net		$	240,426			$	137,557

 

Amortization expense totalled $5,956 and $1,739 for the three months ended March 31, 2023 and 2022, respectively. Future amortization is expected to approximate $23,800 per year.

 

NOTE 6 – RELATED PARTY ADVANCES AND OTHER INTERCOMPANY AGREEMENTS

RELATED PARTY TRANSACTIONS 

Convertible Note and Due to Parent and Affiliates

 

During the three months ended March 31, 2023 and during 2022, the Company had the availability of, but not the contractual right to, intercompany financing from the Parent and Affiliates in the form of either cash advances or borrowings under a convertible note (as discussed below).

 

The convertible notes balances were $61,356 at December 31, 2022. In January 2023, the Company borrowed an additional $48,143 under such convertible notes, and subsequently repaid the outstanding balances of the convertible notes in full in February 2023, such that there were no amounts outstanding under convertible notes as of March 31, 2023.

 

Management Service Agreement

 

In 2020, the Company entered into a management services agreement with a related party (related through common ownership), for which the Company was billed $25,000 quarterly. Effective February 1, 2022, the original management services agreement was amended to have the Company billed at $35,000 quarterly. While the agreement does not stipulate a specific maturity date, it can be terminated with 30 calendar days written notice by any party.

 

The related party currently provides the following services:

 

●

Supportand advice to the Company in accordance with their area of expertise;

 

●

Research,technical review, legal review, recruitment, software development, marketing, public relations, and advertisement; and

 

●

Advice,assistance, and consultation services to support the Company or in relation to any other related matter.

 

During the three months ended March 31, 2023 and 2022, the Company incurred $35,000 in each period under its agreement with Tekcapital Europe Ltd.

 

Rent of Office Space

 

Prior to the February 1, 2022 amendment of the aforementioned management services agreement, the Company was provided with rent-free office space by the Parent and Affiliates. Effective February 1, 2022, Tekcapital began to bill the Company for an allocation of rent paid by Tekcapital on the Company’s behalf. The Company recognized $22,769 of expense related to this arrangement for the three months ended March 31, 2023.

 

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Table of Contents

 

NOTE 7 – COMMITMENTS AND CONTINGENCIES

 

Legal Matters

 

We are not the subject of any material pending legal proceedings; however, we may from time to time become a party to various legal proceedings arising in the ordinary course of business.

 

Leases

 

Our executive offices are located at 11900 Biscayne Blvd., Suite 630 Miami, Florida 33181. Our executive offices are provided to us by the parent of our majority stockholder, Tekcapital (see Note 6). We consider our current office space adequate for our current operations.

 

License Agreements

 

In2022, we entered into various multi-year global license agreements which grant us the right to utilize certain proprietary brands forour smart eyewear products. These agreements require us to pay royalties based on a percentage of net retail and wholesale sales, withcombined future minimum noncancellable payments due under these license agreements of approximately $2.1 million over the next 5 calendaryears.

 

Other Commitments

 

See related party management services agreement discussed in Note 6.

 

NOTE 8 – STOCK-BASED COMPENSATION

STOCK BASED COMPENSATION 

During the three months ended March 31, 2023, we granted the following option awards, all of which had an exercise price of $1.275 per share, and expire on January 13, 2028:

 

●

Options to purchase an aggregate of 330,000 shares of common stock were issued to the Company’s officers and management, of which 1/3 vested immediately, 1/3 shall vest on January 13, 2024, and the remaining 1/3 shall vest on January 13, 2025.

 

●

Options to purchase an aggregate of 75,000 shares of common stock were issued to non-management directors, which vest evenly over three years, whereby 1/3 shall vest on each of January 13, 2024, January 13, 2025, and January 13, 2026.

 

●

Options to purchase an aggregate of 162,000 shares of common stock were issued to certain employees and consultants, which vest evenly over three years, whereby 1/3 shall vest on each of January 13, 2024, January 13, 2025, and January 13, 2026.

 

●

Options to purchase an aggregate of 75,000 shares of common stock were issued an employee, which vest evenly over three years, whereby 1/6 of the options shall vest every six months.

 

●

Options to purchase an aggregate of 6,000 shares of common stock were issued to a consultant, which vested immediately.

 

F-27

Table of Contents

 

Details of the number of share options and the weighted average exercise price outstanding as of and during the three months ended March 31, 2023 are as follows:

 

Schedule of number of share options and the weighted average exercise price outstanding
		Av. Exercise price per share $				Options (Number)
As at January 1, 2023			2.61				2,332,500
Granted			1.28				648,000
Exercised			-				-
Forfeited			-				-
As at March 31, 2023			2.32				2,980,500
Exercisable as at March 31, 2023			2.16				1,339,154

 

As of March 31, 2023, the weighted average remaining contractual life of options was 2.16 years for outstanding options, and 1.80 years for exercisable options.

 

As of March 31, 2023, unrecognized stock option expense of $1,627,154 remains to be recognized over next 3.29 years.

 

NOTE 9 – STOCKHOLDERS’ EQUITY

 

On August 17, 2022, as part of the Company’s initial public offering, the Company issued 1,960,000 warrants to purchase 1,960,000 shares of common stock, which began trading and are currently trading on the Nasdaq Capital Market, under the symbol “LUCYW.” Additionally, pursuant to the terms of the underwriting agreement for the offering, the Company issued to the underwriter certain other warrants to purchase up to 58,800 shares of the Company’s common stock.

 

In February 2023, holders of the Company’s publicly-traded warrants exercised such warrants to purchase an aggregate of 408,600 shares of the Company’s common stock, at an adjusted exercise price of $3.75 per share, resulting in cash proceeds to the Company of $1,532,250. As of March 31, 2023, 1,551,400 of such warrants remain outstanding.

 

None of the warrants issued to the underwriter have been exercised as of March 31, 2023.

 

F-28

Table of Contents

 

NOTE 10 – EARNINGS PER SHARE

 

The Company calculates earnings/(loss) per share data by calculating the quotient of earnings/(loss) divided by the weighted average number of common shares outstanding during the respective period as required by ASC 260-10-50. Due to the net losses for the three months ended March 31, 2023 and 2022, all shares underlying the related party convertible debt, common stock warrants, and common stock options were excluded from the earnings per share calculation due to their anti-dilutive effect.

 

Calculation of net earnings per common share — basic and diluted:

 

Schedule of calculation of net earnings per common share - basic and diluted
		For the three months ended
		March 31, 2023				March 31, 2022
Basic and diluted:
Net loss			(1,430,810	)			(1,206,559	)
Weighted-average number of common shares			7,569,115				6,060,187
Basic and diluted net loss per common share		$	(0.19	)		$	(0.20	)

 

NOTE 11 – SUBSEQUENT EVENTS

 

Warrant Transactions

 

Between April 1, 2023 and April 16, 2023, holders of the Company’s warrants (see Note 9) exercised warrants to purchase an aggregate of 321,120 shares of the Company’s common stock, at an adjusted exercise price of $3.75 per share, resulting in cash proceeds to the Company of $1,204,200.

 

OnApril 17, 2023, the Company entered into a warrant exercise inducement letter agreement (“Inducement Letter”) withcertain accredited investors that were existing holders of warrants to purchase an aggregate of 150,000 shares of theCompany’s common stock for cash, wherein the investors agreed to exercise all of their existing warrants at an exercise priceof $3.75 per share. The gross proceeds to the Company from this transaction, before deducting estimated expenses and fees, was$562,000. In consideration for the immediate exercise of the existing warrants for cash, the exercising holders received newwarrants to purchase up to an aggregate of 300,000 shares of common stock (the “New Warrants”) in a private placementpursuant to Section 4(a)(2) of the Securities Act of 1933, as amended. The New Warrants are immediately exercisable uponissuance at an exercise price of $3.75 per common share and will expire on April 19, 2028. The New Warrants and the shares ofcommon stock issuable upon their exercise, have not been registered under the Securities Act of 1933, and may not be offered or soldin the United States absent registration with the SEC or an applicable exemption from such registration requirements. The NewWarrants were offered only to accredited investors.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

300,000 Shares of Common Stock

 

 

PROSPECTUS

 

 

 

 

        , 2023

 

 

 

 

 

 

 

 

 

 

 

PART II — INFORMATION NOT REQUIRED IN PROSPECTUS

 

Item 13. Other Expenses of Issuance and Distribution

 

The following table sets forth the expenses in connection with this registration statement. All of such expenses are estimates, other than the filing fee payable to the Securities and Exchange Commission.

 

		Amount to be paid
SEC registration fee		$	123.98
Accounting fees and expenses		$	5,000.00
Legal fees and expenses		$	75,000.00
Total		$	80,123.98

 

Item 14. Indemnification of Directors and Officers

 

The Florida Business Corporation Act (the “FBCA”) provides that a corporation may indemnify a director or officer against liability if the director or officer acted in good faith, the director or officer acted in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation, and in the case of any criminal proceeding, the director or officer had no reasonable cause to believe his or her conduct was unlawful. A corporation may not indemnify a director or an officer except for expenses and amounts paid in settlement not exceeding, in the judgment of the board of directors, the estimated expense of litigating the proceeding to conclusion, actually and reasonably incurred in connection with the defense or settlement of such proceeding, including any appeal thereof, where such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interests of the corporation.

 

The FBCA provides that a corporation must indemnify a director or officer who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the individual was a party because he or she is or was a director or officer of the corporation against expenses incurred by the individual in connection with the proceeding.

 

A corporation may, before final disposition of a proceeding, advance funds to pay for or reimburse expenses incurred in connection with the proceeding by a director or an officer if the director or officer delivers to the corporation a signed written undertaking of the director or officer to repay any funds advanced if such director or officer is not entitled to indemnification.

 

Our amended and restated articles of incorporation and bylaws provides that we shall indemnify our directors, officers, employees and agents to the full extent permitted by FBCA, including in circumstances in which indemnification is otherwise discretionary under such law.

 

These indemnification provisions may be sufficiently broad to permit indemnification of our officers, directors and other corporate agents for liabilities (including reimbursement of expenses incurred) arising under the Securities Act.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of our company pursuant to the foregoing provisions, or otherwise, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

We have the power to purchase and maintain insurance on behalf of any person who is or was one of our directors or officers, or is or was serving at our request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other business against any liability asserted against the person or incurred by the person in any of these capacities, or arising out of the person’s fulfilling one of these capacities, and related expenses, whether or not we would have the power to indemnify the person against the claim under the provisions of the FBCA. We do not currently maintain director and officer liability insurance on behalf of our director and officers; however, we intend to so purchase and maintain such insurance when economically feasible.

 

 

Additionally, our second amended and restated articles of incorporation provides that we shall, to the maximum extent permitted from time to time under the law of the State of Florida, indemnify and upon request shall advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was or has agreed to be a director or officer of ours or while a director or officer is or was serving at our request as a director, officer, partner, trustee, employee or agent of any corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against expenses (including attorneys’ fees and expenses), judgments, fines, penalties and amounts paid in settlement incurred in connection with the investigation, preparation to defend or defense of such action, suit, proceeding or claim; provided, however, that the foregoing shall not require us to indemnify or advance expenses to any person in connection with any action, suit, proceeding or claim initiated by or on behalf of such person or any counterclaim against us initiated by or on behalf of such person. Such indemnification shall not be exclusive of other indemnification rights arising under any by-law, agreement, vote of directors or stockholders or otherwise and shall inure to the benefit of the heirs and legal representatives of such person. Any person seeking indemnification shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established. Any repeal or modification of our second amended and restated articles of incorporation shall not adversely affect any right or protection of a director or officer of ours with respect to any acts or omissions of such director or officer occurring prior to such repeal or modification.

 

Expenses incurred by such a person in defending a civil or criminal action, suit or proceeding by reason of the fact that such person is or was, or has agreed to become, a director or officer of ours, or is or was serving, or has agreed to serve, at our request, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, including any employee benefit plan, or by reason of any action alleged to have been taken or omitted in such capacity shall be paid by us in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such person to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by us as authorized by relevant sections of the FBCA. Notwithstanding the foregoing, we shall not be required to advance such expenses to a person who is a party to an action, suit or proceeding brought by us and approved by a majority of our Board of Directors that alleges willful misappropriation of corporate assets by such person, disclosure of confidential information in violation of such person’s fiduciary or contractual obligations to us or any other willful and deliberate breach in bad faith of such person’s duty to us or our stockholders.

 

We shall not indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person unless the initiation thereof was approved by our Board of Directors.

 

The indemnification rights provided in our bylaws, which will be in effect upon the consummation of this offering, shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any by-law, agreement or vote of stockholders or disinterested directors or otherwise, both as to action in their official capacities and as to action in another capacity while holding such office, continue as to such person who has ceased to be a director or officer, and inure to the benefit of the heirs, executors and administrators of such a person.

 

If the FBCA Law is amended to expand further the indemnification permitted to indemnitees, then we shall indemnify such persons to the fullest extent permitted by the FBCA, as so amended.

 

We may, to the extent authorized from time to time by our Board of Directors, grant indemnification rights to other employees or agents of ours or other persons serving us and such rights may be equivalent to, or greater or less than, those set forth in our bylaws, which will be in effect upon the consummation of this offering.

 

Our obligation to provide indemnification under our bylaws, which will be in effect upon the consummation of this offering, shall be offset to the extent of any other source of indemnification or any otherwise applicable insurance coverage under a policy maintained by us or any other person.

 

 

To assure indemnification under our bylaws, which will be in effect upon the consummation of this offering, of all directors, officers, employees or agents who are determined by us or otherwise to be or to have been “fiduciaries” of any employee benefit plan of ours that may exist from time to time, the FBCA shall, for the purposes of our bylaws be interpreted as follows: an “other enterprise” shall be deemed to include such an employee benefit plan, including without limitation, any plan of ours that is governed by the Act of Congress entitled “Employee Retirement Income Security Act of 1974,” as amended from time to time; we shall be deemed to have requested a person to serve an employee benefit plan where the performance by such person of his duties to us also imposes duties on, or otherwise involves services by, such person to the plan or participants or beneficiaries of the plan; and excise taxes assessed on a person with respect to an employee benefit plan pursuant to such Act of Congress shall be deemed “fines.”

 

Our bylaws, which will be in effect upon the consummation of this offering, shall be deemed to be a contract between us and each person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that person is or was, or has agreed to become, a director or officer of ours, or is or was serving, or has agreed to serve, at our request, as a director, officer or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, including any employee benefit plan, or by reason of any action alleged to have been taken or omitted in such capacity, at any time while this by-law is in effect, and any repeal or modification thereof shall not affect any rights or obligations then existing with respect to any state of facts then or theretofore existing or any action, suit or proceeding theretofore or thereafter brought based in whole or in part upon any such state of facts.

 

The indemnification provision of our bylaws, which will be in effect upon the consummation of this offering, does not affect directors’ responsibilities under any other laws, such as the federal securities laws or state or federal environmental laws.

 

We may purchase and maintain insurance on behalf of any person who is or was a director, officer or employee of ours, or is or was serving at our request as a director, officer, employee or agent of another company, partnership, joint venture, trust or other enterprise against liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not we would have the power to indemnify him against liability under the provisions of this section. We currently maintain such insurance.

 

The right of any person to be indemnified is subject to our right, in lieu of such indemnity, to settle any such claim, action, suit or proceeding at our expense of by the payment of the amount of such settlement and the costs and expenses incurred in connection therewith.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling our company pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

 

In the event that a claim for indemnification against such liabilities (other than the payment of expenses incurred or paid by a director, officer or controlling person in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered herewith, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to the court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

The Registrant plans to enter into an placement agency agreement, which provides that the placement agents are obligated, under some circumstances, to indemnify the Registrant’s directors, officers and controlling persons against specified liabilities, including liabilities under the Securities Act.

 

 

Item 15. Recent Sales of Unregistered Securities

 

During the last three years, the Company has not issued unregistered securities to any person, except as described below. None of these transactions involved any underwriters, underwriting discounts or commissions, except as specified below, or any public offering, and, unless otherwise indicated below, the Company believes that each transaction was exempt from the registration requirements of the Securities Act by virtue of Section 4(a)(2) thereof and/or Rule 506 of Regulation D promulgated thereunder, and/or Regulation S promulgated thereunder regarding offshore offers and sales. All recipients had adequate access, though their relationships with the Company, to information about the Company.

 

Convertible Promissory Notes

 

On December 1, 2020, we issued a convertible note for an aggregate principal amount of up to $2,000,000 to Lucyd Ltd., the majority stockholder of the Company (the “Note”). On June 1, 2021, we completed the partial conversion of $778,500 of the outstanding balance on the Note into an aggregate of 778,500 shares of common stock. On September 5, 2021, we completed the partial conversion of an aggregate of $500,002 of the outstanding balance on the Note, at $3.56 per share, into an aggregate of 140,449 shares of common stock. On November 1, 2021, the Company executed an amended and restated Note, increasing the amount of available financing from $2,000,000 to $3,000,000. On November 16, 2021, we completed the partial conversion of an aggregate of $901,270.96 of the outstanding balance on the Note, at $3.56 per share, into an aggregate of 253,166 shares of common stock. On August 14, 2022, we completed the partial conversion of an aggregate of $2,002,280 of the outstanding balance on the Note, at $7.50 per share, into an aggregate of 266,970 shares of common stock. As of the date of this prospectus, $0 remains outstanding on the Note.

 

Regulation CF Offerings

 

In June 2020, the Company commenced an offering pursuant to Regulation CF of the Securities Act, through the intermediary portal, StartEngine.com, pursuant to which we offered shares of our common stock for $1.00 per share. The offering was terminated in April 2021 and we issued 1,091,717 shares of common stock for aggregate gross proceeds of $1,091,717.

 

On July 12, 2021, the Company issued an aggregate of 1,000 shares of common stock for $1.00 per share to an individual investor, pursuant to a subscription agreement with the Company, for aggregate gross proceeds of $1,000.

 

In July 2021, the Company launched its second Crowdfunded offering of common stock in which it raised $149,480, amounting to 45,355 shares, offset by $115,523 in offering costs.

 

Warrant Exercise Inducement and Issuance

 

On April 17, 2023, we entered into a warrant exercise inducement letter agreement (“Inducement Letter”) with a certain accredited investor that is an existing holder of Listed Warrants to purchase an aggregate of 150,000 shares of the Company’s common stock for cash (the “Existing Warrants”), wherein the investor agreed to exercise all of its Existing Warrants at an exercise price of $3.75 per share. The Existing Warrants were previously issued in an initial public offering which closed on August 17, 2022. For acting as a financial advisor related to the Inducement Letter, we agreed to pay Maxim Group LLC a cash fee equal to eight percent (8.0%) of the total proceeds from the exercise of the Existing Warrants. The gross proceeds of the exercise of the Existing Warrants to the Company, before deducting estimated expenses and fees, are expected to be approximately $562,000. In consideration for the immediate exercise of the Existing Warrants for cash, the exercising holder received new warrants to purchase up to an aggregate of 300,000 shares of common stock (the “New Warrants”) in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The New Warrants are immediately exercisable upon issuance at an exercise price of $3.75 per share of common stock and will expire on April 19, 2028.

 

Stock Options

 

Since our inception, we have issued options exercisable for an aggregate of 1,685,000 shares of common stock. These options have a weighted average exercise price of $2.32 per share.

 

 

Item 16. Exhibits

 

The following is a list of exhibits filed as a part of this registration statement:

 

Exhibit Number		Description of Document
3.1		Amended and Restated Articles of Incorporation of Innovative Eyewear, Inc. (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
3.2		Second Amended and Restated Articles of Incorporation of Innovative Eyewear, Inc. (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
3.3		Amended and Restated Bylaws of Innovative Eyewear, Inc. (incorporated by reference to Exhibit 3.3 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
3.4		Second Amended and Restated Bylaws of Innovative Eyewear, Inc. (incorporated by reference to Exhibit 3.4 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
4.1		Form of Representative’s Warrant (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 20, 2022)
4.2		Form of Warrant (incorporated by reference to Exhibit 4.2 of the Company’s Registration Statement on Form S-1 filed with the SEC on August 11, 2022)
4.3		Form of Warrant Agency Agreement between Innovative Eyewear, Inc. and VStock Transfer, LLC (incorporated by reference to Exhibit 4.4 of the Company’s Registration Statement on Form S-1 filed with the SEC on May 6, 2022)
4.4		Form of Warrant (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed with the SEC on April 17, 2023)
5.1		Opinion of Ellenoff Grossman & Schole LLP*
10.1		License Agreement between Innovative Eyewear, Inc. and Lucyd Ltd. (incorporated by reference to Exhibit 10.1 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.2		Addendum to the License Agreement between Innovative Eyewear, Inc. and Lucyd Ltd. (incorporated by reference to Exhibit 10.2 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.3		Management Agreement between Innovative Eyewear, Inc. and Tekcapital Europe Ltd.# (incorporated by reference to Exhibit 10.3 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.4		Convertible Note, dated December 1, 2020, issued to Lucyd Ltd. (incorporated by reference to Exhibit 10.4 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.5		Intercompany Loan and Debt Transfer Agreement, dated June 1, 2021, by and among Innovative Eyewear, Inc., Lucyd Ltd., Tekcapital pk, Tekcapital Europe Ltd. and Tekcapital LLC (incorporated by reference to Exhibit 10.5 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.6		Employment Agreement by and between Innovative Eyewear, Inc. and Harrison Gross# (incorporated by reference to Exhibit 10.6 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.7		Employment Agreement by and between Innovative Eyewear, Inc. and Konrad Dabrowksi# (incorporated by reference to Exhibit 10.7 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.8		Consulting Agreement by and between Innovative Eyewear, Inc. and Frank Rescigna# (incorporated by reference to Exhibit 10.8 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.9		Amendment to the Consulting Agreement by and between Innovative Eyewear, Inc. and Frank Rescigna# (incorporated by reference to Exhibit 10.9 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.10		Innovative Eyewear, Inc. 2021 Equity Incentive Plan (incorporated by reference to Exhibit 4.1 of the Company’s Registration Statement on Form S-8 filed with the SEC on September 30, 2022)
10.11		Sale Representation Agreement by and between Innovative Eyewear, Inc. and D. Landstrom Associates, Inc. (incorporated by reference to Exhibit 10.11 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.12		Distribution Agreement by and between Innovative Eyewear, Inc. and 8 Points Inc. (incorporated by reference to Exhibit 10.12 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.13		Amended and Restated Convertible Note, dated November 1, 2021, issued to Lucyd Ltd. (incorporated by reference to Exhibit 10.13 of the Company’s Registration Statement on Form S-1 filed with the SEC on January 10, 2022)
10.14		Form of Inducement Letter (incorporated by reference to Exhibit 4.1 of the Company’s Current Report on Form 8-K filed with the SEC on April 17, 2023)
23.1		Consent of Cherry Bekaert LLP, Independent Registered Public Accounting Firm*
23.2		Consent of Ellenoff Grossman & Schole LLP (contained in Exhibit 5.1)*
24.1		Powers of Attorney*
107		Filing Fee Table*

 

	*	Filed herewith.
	#	Indicates management contract or compensatory plan.

 

 

Item 17. Undertakings

 

(1)

The undersigned registrant hereby undertakes:

 

(a)

To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

	(i)	To include any prospectus required by Section 10(a)(3) of the Securities Act;
	(ii)	To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
	(iii)	To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

 

(2)

That, for the purpose of determining any liability under the Securities Act, each such post- effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

(3)

To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

 

(4)

That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A (§230.430A of this chapter), shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

 

(5)

That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities:

 

The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

(i)

Anypreliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;

 

 

(ii)

Anyfree writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by theundersigned registrant;

 

(iii)

Theportion of any other free writing prospectus relating to the offering containing material information about the undersigned registrantor its securities provided by or on behalf of the undersigned registrant; and

 

(iv)

Anyother communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

(6)

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

 

Signatures

 

Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Miami, State of Florida, on May 26, 2023.

 

	Innovative Eyewear, Inc.
	By:	/s/ Harrison Gross
		Name:	Harrison Gross
		Title:	Chief Executive Officer

 

POWER OF ATTORNEY

 

KNOW ALL BY THESE PRESENT, that each person whose signature appears below constitutes and appoints Harrison Gross as his true and lawful attorney-in-fact and agent, with the full power of substitution, for him or her and in his or her name, place or stead, in any and all capacities, to sign any and all amendments to this registration statement (including post-effective amendments), and to sign any registration statement for the same offering covered by this registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

 

Pursuant to the requirements of the Securities Act, this registration statement has been signed below by the following persons in the capacities and on the dates indicated.

 

Person		Capacity		Date
/s/ Harrison Gross		Chief Executive Officer and Director		May 26, 2023
Harrison Gross		(Principal Executive Officer)
/s/ Konrad Dabrowski		Chief Financial Officer		May 26, 2023
Konrad Dabrowski		(Principal Financial and Accounting Officer)
/s/ Kristen McLaughlin		Director		May 26, 2023
Kristen McLaughlin
/s/ Louis Castro		Director		May 26, 2023
Louis Castro
/s/ Olivia C. Bartlett		Director		May 26, 2023
Olivia C. Bartlett